INDEX OF POSTAL FREEDOM Consumer Postal Council

Document Sample
INDEX OF POSTAL FREEDOM Consumer Postal Council Powered By Docstoc
					C O N S U M E R                                      P O S T A L                             C O U N C I L


         With Preface by David C. Williams, Inspector General for the United States Postal Service

        The Postal Freedom Index was created by the Consumer Postal Council
        to serve as an information resource about the provision of postal services
        in different nations. The Index takes into account such factors as market
        liberalization, government or private ownership of providers, level of
        competition within markets, degree of regulation, and universal service.

1600 Wilson Boulevard, Suite 900A, Arlington, VA 22209 | Tel 703.312.4563 | |
                                       F O R E W O R D

As global commerce and communications are rapidly evolving, so too is the provision of postal services throughout
the world. It has become a formidable challenge for national posts to keep up with these changes and to align
their services to meet the shifting needs of their customers.

While new technologies have disrupted postal services and the way they are offered, the marketplace for
these services is in the midst of its own transformation. Consumers and businesses have readily adopted new
technologies that allow for instantaneous communications. Consumers are becoming increasingly comfortable
relying on their cell phones and smart devices to conduct a variety of transactions, including those they used to
do by mail. We live and work in a global community where communications have no national borders.

A growing number of national posts have expanded their products and services beyond traditional mail delivery
offerings with a goal of generating new revenue to sustain their operations in an era of declining mail volume. As
the world’s posts attempt to adapt to this changing market, rightsize their infrastructures for this new reality, and
integrate the legal requirements of the digital age, it provides a rich laboratory from which all posts can learn.

It is with these challenges in mind that I commend to you this 2012 edition of the U.S. Consumer Postal Council’s
Index of Postal Freedom. The Index is a unique resource that offers valuable background and history about
the provision of postal services around the world. Its analysis of trends and developments ultimately places
each nation’s postal system along dual axes representing market freedom and market competition, providing a
broad lens that invites comparison. Which innovations are worthy of replicating? Which quandaries should be
recognized and avoided? In the current era, with the implications of the digital age and its effect on posts just
being realized, such big picture analyses are useful in informing our policy discussions.

David C. Williams
Inspector General for the United States Postal Service

                              I N T R O D U C T I O N

The Consumer Postal Council is pleased to present its Index of Postal Freedom, 2012 Edition. Inside, you will
find updated versions of many of the highlights from last year’s index, including original analyses of postal
service around the world that discuss factors such as liberalization, regulation, competition and the involvement
of national posts in offering financial and other non-postal services.

This year, we have updated the Index to include the most recent facts and figures as reported by national posts
around the world and also to consider important events and developments ranging from postal liberalization
initiatives in the European Union to the implications of the 2011 Korea-U.S. Free Trade Agreement. We have
added new countries to the Index, like Turkey and Switzerland, and included an exciting new feature we call
“Market Comparisons,” analyzing aspects of postal service of particular interest to the world’s postal consumers.

Don Soifer
Executive Director, The U.S. Consumer Postal Council

2   Consumer Postal Council | Index of Postal Freedom | 2012
C O N S U M E R                         P O S T A L                     C O U N C I L

Foreword by David C. Williams, Inspector General for the United States Postal Service ……………………… 1
Introduction by Don Soifer, Executive Director, The U.S. Consumer Postal Council …………………………… 2
Overview ………………………………………………………………………………………………… 5
Brazil - Correios/ECT …………………………………………………………………………………… 6
Canada - Canada Post …………………………………………………………………………………… 10
Chile - Correos de Chile ………………………………………………………………………………… 16
China - China Post ……………………………………………………………………………………… 20
Egypt - Egypt Post …………………………………………………………………………………… 24
France - La Poste ……………………………………………………………………………………… 28
Germany - Deutsche Post ……………………………………………………………………………… 32
Hungary - Magyar Posta ……………………………………………………………………………… 38
India - India Post ……………………………………………………………………………………… 42
Indonesia - Pos Indonesia ……………………………………………………………………………… 46
Israel - Israel Post ……………………………………………………………………………………… 50
Italy - Poste Italiane …………………………………………………………………………………… 54
Japan - Japan Post ……………………………………………………………………………………… 60
Kenya - Postal Corporation of Kenya ………………………………………………………………… 66
Korea - Korea Post ……………………………………………………………………………………… 70
Mexico - Sepomex ……………………………………………………………………………………… 74
Netherlands - TNT Post ……………………………………………………………………………… 78
New Zealand - New Zealand Post ……………………………………………………………………… 82
Russia - Pochta Rossii …………………………………………………………………………………… 88
Spain - Correos ………………………………………………………………………………………… 92
Sweden - Posten ………………………………………………………………………………………… 98
Switzerland ……………………………………………………………………………………………… 104
Turkey…………………………………………………………………………………………………… 110
United Kingdom - Royal Mail ………………………………………………………………………… 116
United States - USPS …………………………………………………………………………………… 120
Market Comparisons ………………………………………………………………………………… 126

4   Consumer Postal Council | Index of Postal Freedom | 2012
C O N S U M E R                                     P O S T A L                                   C O U N C I L

                                                 MARKET COMPETITION
                                                       Very Competitive


                                                                                                     United Kingdom


                                                                              Russia     Germany

Restricted Market                                                                                                        Free Market

                                                             Kenya                       Indonesia   New Zealand

                                                                                Israel                 Netherlands
                                     Egypt                           Spain                Mexico

                                                                             Brazil      France
   Switzerland                Canada Hungary

                     United States



                                                        Not Competitive

      The Postal Freedom Index was created by the Consumer Postal Council to serve as an information resource
      about the provision of postal services in different nations. The Index takes into account such factors as
      market liberalization, government or private ownership of providers, level of competition within markets,
                                     degree of regulation, and universal service.

                    NOTE: Size of marker corresponds to size of postal market in number of pieces per year.


6   Consumer Postal Council | Index of Postal Freedom | 2012
                                     C O R R E I O S                                         /        E C T

                    MARKET COMPETITION:                        Brazil’s far-flung postal service was restructured as a
                      Very Competitive
                                                               state company in 1969. Empresa Brasileira de Correios
                                                               e Telégrafos (Brazilian Post and Telegraph Company)
                                                               is commonly referred to as Correios/ECT or simply
                                                               ECT. Although modestly reconfigured in 1978, ECT
                                                               remains solidly in federal control. Its government-
                                                               appointed board reports directly to the Minister of
                                                               Communications in Brasilia, the country’s capital.
                                                               Traditional mail delivery is becoming a smaller part
                                                               of ECT operations and revenues. As elsewhere in
MARKET FREEDOM:                            MARKET FREEDOM:
Restricted Market                                Free Market   the world, mail volumes are trending downward.
                                                               Brazil’s vastness makes the country an ideal setting
                                                               for electronic communications, which are increasingly
                                                               replacing paper mail.
                                                               On the foundation of its 83,000 full-time staff and
                                                               its extensive network of 12,200 post offices, ECT
                                                               has been reinventing itself as a “bank of services” for
                                                               Brazilians, contracting its distribution infrastructure
                                                               to other government agencies and private businesses.
                    MARKET COMPETITION:
                                                               Through joint ventures and contracts, ECT has also
                       Not Competitive                         moved aggressively into banking services of all kinds.
                                                               Correios and Brazil’s largest bank, Banco Bradesco,
                                                               entered into a 10-year joint venture in 2001 whereby
                                                               Bradesco could use ECT post offices as bank branches,
                                                               especially in remote areas. The new venture, Banco
Postal, has been so successful – offering deposits, loans, credit cards, bill payment, direct deposit, tax and social
security payments, as well as phone and internet banking on Bradesco’s network – that ECT is thinking of
cancelling the deal and setting up its own more closely held banking operation.
Banco Postal, as a unit of Banco Bradesco, is regulated by the Brazilian central bank.
The revenues from these “non-mail” services are making traditional mail service somewhat of an afterthought,
even though delivering the mail with reasonable promptness across Brazil remains a formidable undertaking.


Although competition is allowed in express mail, ECT continues to hold a monopoly in traditional letter mail,
as well as in small parcels, telegrams and mail bags. Proposed sunset dates for ending the monopoly range out
to 20 years. ECT itself maintains that the monopoly is not a privilege, but a “financing mechanism” to fund the
nation’s universal service requirement throughout Brazil’s huge hinterland. It also claims not to have received
direct subsidies from the government since 1986.
Transportation of larger parcels and physical goods, however, has been fully opened to both domestic and international
players. ECT is very active in this highly profitable sector, where the competition from the likes of DHL, FedEx,
TNT and UPS is fierce. ECT says “it will transport almost anything to any of Brazil’s over 5,000 cities.”
In the late 1990s, there was a series of studies and proposals aimed at liberalizing -- but not privatizing -- ECT.
These recommendations have been blocked by interest groups, hung up in litigation, or simply overwhelmed
by the rush of economic development. Only ECT faces the universal service obligation.

ECT enjoyed the fruits of the “Brazilian Miracle” of pronounced economic development in the 1960s and
1970s with rising delivery volumes and increased investment. But when the economy turned sour in the early
1980s and foreign investment dried up, ECT undertook a unique experiment to expand its network -- it sold
mail franchises to private investors in major cities.
Postal operators could buy in for an initial fee under $500, use the widely recognized Correios logo, and
compete with both each other and ECT-owned units. These franchises were never seen as replacing post
office units, but they did introduce a certain element of service competition into the system. Some 1,700
franchises were established between 1993 and 1994, and many remain today. Franchise purchasers are
owner-managers who are required to purchase services from ECT, and revenues are passed back to ECT
after royalty payments, service costs, and a profit.

In response to economic troubles in the early 1990s, Brazil launched a countrywide liberalization program -- the
Real Plan. ECT, however, managed to avoid many of the liberalization program’s efforts.
Instead, as the new, technologically driven economy took off, politically connected ECT found ways to position itself
in new banking and finance ventures through joint partnerships and concessions. Before long, the bulk of ECT’s
revenues were coming from its burgeoning banking ventures. In partnership with Bank of Brazil, ECT built up a
web of banking enterprises which turned post offices into banking service centers. Banco Postal -- a joint venture
with Banco Bradesco, Brazil’s largest private bank -- opened its doors in 2002 and already has many millions of
customers. Some 5,000 of ECT’s 12,000 branches nationwide are to become selling points for Banco Postal services.
In addition, ECT has expanded contract services both for other government agencies and for private businesses
-- bill processing, tax registration, online access, forms and documents, auto registration, passports, voting,
collecting fees and more. These contract services amount to over 20% of ECT revenues.

8   Consumer Postal Council | Index of Postal Freedom | 2012
                                    C O R R E I O S                                          /         E C T

The bicameral National Congress, which sits in Brasilia, ultimately arbitrates postal policy through Brazil’s 26 states.
ECT has a government-appointed Board of Directors that reports directly to the Minister of Communications.
A tangle of reform proposals is currently floating through the legislature. Some say a portion of basic delivery
will be outsourced through concession. All proposals mandate the government retain at least 51% of ECT voting
shares. ECT has also been ordered to maintain at least its current number of employees.
It has also been proposed that yet another regulatory agency “linked to the government,” ANAPOST, be
established to set rates for basic postal services, complement regulatory policies, and check compliance. Insiders
and competitors say that such agencies, in the context of Brazilian politics and government, are more likely to be
another source of corruption than a fair and impartial arbitrator.
Indeed, charges of corruption within ECT have been frequent. In 2005, a postal procurement/kickback scandal
resulted in ongoing televised investigations and multiple dismissals of managers.

ECT fulfills the universal service requirement, and each postal operator in Brazil is assessed 0.5% of its
revenues for a fund for Postal Service Universalization.
Rate controls only apply to the traditional mail sector, and controlled rates are held low by the government.
The monopoly consists of letters, postal cards, telegrams and special mail bags. Express mail, packages, printed
matter including newspapers and magazines are not part of the reserved area and are open to competition.


10   Consumer Postal Council | Index of Postal Freedom | 2012
                                                   C A N A D A                                    P O S T

                     MARKET COMPETITION:                       Canada Post is the national postal service of Canada.
                       Very Competitive
                                                               For nearly thirty years, it has retained a monopoly on all
                                                               letters weighing less than 500 grams traveling within
                                                               the country. Canada Post competes against private-
                                                               sector firms to offer other services, like parcel delivery.
                                                               In 2010, mail volume declined for the fourth straight
                                                               year. Each household received an average of about 320
                                                               pieces of mail during the year. While mail volumes are
                                                               declining, the number of Canadian points of delivery
                                                               is increasing each year.

MARKET FREEDOM:                            MARKET FREEDOM:
                                                               In 2010, Canada Post achieved a 96-percent rate of
Restricted Market                                Free Market   on-time delivery of letters. The “on-time” designation
                                                               ranges from two to four business days, depending on
                                                               the distance traveled. There are over 23,000 delivery
                                                               routes, and that number is projected to grow. Canada
                                                               Post delivers 45 million pieces of mail each day to
                                                               about 15 million addresses.
                                                               Canada Post maintains a significant presence in express
                                                               services. In 1993, it bought courier company Purolator.
                                                               It now maintains a 91 percent stake in the firm. In
                                                               2010, Purolator’s revenue increased 4.1 percent, to $1.5
                                                               billion CAN, and was responsible for nearly 19 percent
                     MARKET COMPETITION:
                        Not Competitive                        of the Post’s total revenue.
                                                           The first mail delivery occurred in 1693 when Pedro
                                                           da Silva was paid to deliver mail between Montreal and
                                                           Quebec City. He was later named the “first courier” in
Canada. In 1867, the Dominion of Canada created the Post Office Department, thus giving birth to the modern
postal system. Prior to that date, there had been unofficial routes, mainly connecting the eastern cities.
In October 1981, the Canada Post Corporation Act placed the postal service under the auspices of a new, government-
owned, semi-autonomous corporation of the same name. The change was welcome, as Canada Post ran deficits
every year from 1964 to 1981. In 2008, Canada Post made up 80 percent of the holding company’s revenue.

Canada Post maintains a broad monopoly on mail service. Letters weighing less than 500 grams are subject
to the national post’s monopoly. Magazines and books may be delivered by private firms. Private companies
can deliver “letters of an urgent nature” if they charge at least three times Canada Post’s regular rate of
postage for a 50-gram package.


LIBERALIZATION                       (CONTINUED)
Private firms are allowed to handle bulk mail sent by Canadian interests to destinations outside the country. Government
authorities have generally held that Canada Post’s monopoly only applies to mail sent within the country. In 1988,
Canada Post stated that “outbound mail is not protected by exclusive privilege.” But in 2004, the Post went to court
to try to have the government re-interpret the exclusive privilege to include outbound international mail. Although
the court ruled in favor of Canada Post, private firms have continued to operate within the sector. Legislation was
introduced in parliament in 2007 to officially exclude outbound international mail from Canada Post’s exclusive
privilege. In June 2010, outbound international mail was removed from Canada Post’s exclusive privilege.
Canada Post and the United States Postal Service (USPS) maintain a bilateral inbound competitive service
agreement, which dictates the levels of remuneration for delivering mail originating in one country and destined
for the other. Canada Post and USPS negotiate their terminal dues through this agreement rather than through
the Universal Postal Union. The bilateral agreement is classified as a market-dominant product under U.S. law
because Canada and USPS both maintain letter-mail monopolies.
Mail delivery between the two countries was briefly interrupted in June 2011 when Canadian postal workers
struck on a rotating basis for three weeks. For ten days, USPS stopped accepting letters for delivery to Canada.
In response to the strikes, Canada Post locked its workers out, effectively cutting off mail delivery within the
country. The Canadian Parliament ordered Canada’s postmen back to work on June 26; USPS then announced
that it would release the backlog for delivery to Canada in stages.

An Ipsos Reid poll conducted on behalf of the Canadian Union of Postal Workers (CUPW) determined
that about 70 percent of Canadians oppose allowing private companies to deliver mail in Canada.
The opposition to privatization stems from the popularity of the current pricing system. Some Canadians fear
that private competitors will force Canada Post to charge different fees depending on the destination of a letter.
The postal unions oppose privatization because they fear job losses. They claim privatization will result in
more expensive delivery costs for consumers and fewer service counters.
Between 2010 and 2014, however, Canada Post plans annual stamp-price increases.
The Canadian Union of Postal Workers has launched an official campaign against “closures, privatization,
and deregulation of Canada Post.” One of the motivating factors for the campaign was the 2008 launch
of the Canada Post Corporation Strategic Review (CPCSR). A three-member panel appointed by the
Conservative government released its report in mid-2009.
The CPCSR panel did not consider whether Canada Post should be privatized. The report did recommend
scrapping a moratorium on the closure of rural post offices in favor of new procedures that could allow
post offices to be privately operated. The CPCSR also stated that Canada Post’s regulated products should
generate enough revenue for the organization to be self-sufficient. The panel raised the possibility that
significant one-time rate hikes might be necessary to achieve such an outcome.

12   Consumer Postal Council | Index of Postal Freedom | 2012
                                                C A N A D A                                P O S T

Certain functions within Canada Post have already been privatized. Some post offices are privately owned and
run as franchises. Some non-core activities are contracted out to private concerns, and Canada Post offers
pricing incentives to mailers who presort.
A 2011 study by the Montreal Economic Institute argued that “the burdens for Canada Post of declining
mail volumes, costly rural routes and the need for modernisation could be solved by privatising it.” The
researchers cited privatization initiatives in Europe as potential models for Canada.

The universal service obligation requires Canada Post to deliver mail five days a week to every address in Canada
for one uniform price. Mail is defined as letters, parcels, and publications. Standard-sized letters require only
one stamp, regardless of destination. The price to send parcels, however, depends on the distance. The Post
is obligated to deliver materials for the blind for free. Ultimately, prices and services must meet “reasonable”
standards, but the definition of reasonable is not specified.
After passage of the Canada Post Corporation Act in 1981, the Post reduced service in rural areas from six days
per week to five and cut multiple deliveries to businesses, eventually to just one delivery per day.
The CPCSR recommended that Canada Post and the national government draft a Service Charter that lays out
explicitly the terms of the universal service obligation. The Charter was drafted in September 2009.

Private international mail firms are allowed to transfer packages sent by Canadian corporations to
destinations outside the country. Materials sent in this manner include checks, invoices, and brochures from
large corporations. Despite the 2004 court ruling which determined that outbound international mail was the
exclusive privilege of Canada Post, private firms have continued to operate as they did before the decision. The
federal government has been trying to pass a law that would solidify the private companies’ right to operate
since 2007, but no such law has passed.
In 1993, Canada Post purchased Purolator, a competing courier company. In 2010, this branch of Canada Post
was the leading overnight courier company in the country and contributed 18.8 percent of Canada Post’s
revenue. Canada Post also maintains an agreement with FedEx Ground in which the national post delivers FedEx
packages to some of the country’s more rural and isolated addresses.

The Minister of Transportation officially oversees Canada Post. Canada Post’s eleven-member board of directors,
however, guides overall strategy. The Board includes Canada Post’s President and Chief Executive Officer. Board
members also sit on special committees for such topics as pensions, corporate social responsibility, and auditing.


ORGANIZATION & STRUCTURE                                     (CONTINUED)
In 1997, the first Ombudsman was appointed. This person provides an independent avenue through which
customers can raise issues that could not be resolved though traditional channels. The Ombudsman does not
mediate labor disputes; the office was created with the express purpose of addressing customer satisfaction.
Canada Post has 69,000 employees, including about 15,000 letter carriers. About 60,000 workers -- or more than
80 percent of the Post’s labor force -- are unionized. The most prominent union is the CUPW. In June 2011,
workers went on strike for nearly a month.
The contracts between Canada Post and the unions stipulate that labor disputes are to be adjudicated by one of
about a dozen arbitrators across the country. The arbitrator’s decision on a matter is final. The union involved
and Canada Post split the cost associated with the arbitrator.
As has happened in the United States, Canada Post is looking to centralize deliveries around cluster boxes in
order to cut costs and head off safety disputes. In 2009, for instance, the Post announced that it would review
delivery to 843,000 addresses, particularly in rural areas, because delivering to those addresses may pose safety
risks. Postal labor unions see this as cover for potential job cuts.
About 6,500 post offices serve the 15 million addresses in Canada. The services offered by Canada Post can be
divided into three categories: Transaction mail (domestic letter mail, international letter-post, and Epost), Parcel
(priority next Am, Xpresspost, and Borderfree), and direct marketing (addressed and unaddressed).
While rural post office locations continue to combine retail and delivery functions, increasingly, urban post
offices have divided the two functions to different locations.

In 2000, a price-cap formula was implemented that holds basic letter rates to two-thirds the rate of inflation. As
of 2010, a first class stamp goes for $0.57 CAN. Two-cent increases are planned annually from 2011 to 2014. That
would put the price of a stamp at 65 cents in four years.
In 2010, Canada Post’s revenue increased 1.9 percent to $7.4 billion CAN, thanks largely to the price increases.
Canada Post offers a “Permanent Stamp,” which is sold at the going rate but may be used as a first class stamp
even after a stamp price increase.
Transaction mail makes up over half of the Post’s revenue. Parcel post and direct marketing contribute 21 percent
and 23 percent, respectively. Businesses and government are responsible for 90 percent of Canada Post’s mail volume.

The increasing popularity of e-mail and digital transactions poses a challenge for Canada Post. In 2000, the national
post implemented an electronic alternative called Epost to compensate for the decrease in letter mail. A part of the
Transaction Mail line, Epost allows customers to pay bills, view statements, and receive payments through Canada Post.

14   Consumer Postal Council | Index of Postal Freedom | 2012
                                                     C A N A D A                                      P O S T

FUTURE              (CONTINUED)
In addition to the stamp-price hikes described above, the organization will raise the rates charged for publication delivery by
3 percent in 2010, despite protests from the magazine industry. Since 2002, magazine delivery rates have gone up 38 percent.
Canada Post is also looking to achieve annual savings of $250 million by 2017. It hopes to upgrade some services
for bulk mail clients, including presorting and permit indicia.
Due to competition from other providers, the national post expects low growth in the parcel sector. To combat
this, Canada Post is looking to modernize mail delivery. By implementing new technologies, the organization
hopes to ensure parity with peers in efficiency and pricing. Renovations will include new sorting techniques and
implementation of a “clean addresses” list, which could result in less undeliverable mail and more efficiency.
Officials project that this transformation will cost about $2.7 billion.
Like many other public-sector entities, Canada Post faces significant pension-funding challenges. Its pension plan has a
$3.2-billion deficit, and much to the CUPW’s chagrin, the Post is refusing to offer new workers a defined-benefit plan.
Each year, Canada Post adds about 200,000 addresses to its delivery list. The number of pieces per delivery point,
however, has declined 17.2 percent over the last five years. The combination of decreasing volume and increasing
service requirements represents a significant challenge.


16   Consumer Postal Council | Index of Postal Freedom | 2012
                       C O R R E O S                                         D E                C H I L E

                    MARKET COMPETITION:                         In 1747, the king of Spain decreed a standardization of
                      Very Competitive
                                                                mail delivery throughout his far-flung empire, which
                                                                included Chile. As a result, the first Chilean royal
                                                                superintendent of the mails was appointed.
                                                                Today, Correos de Chile serves a population of roughly
                                                                16.5 million Chileans, the majority of whom still live in the
                                    Chile                       metropolitan area of Santiago and its nearby port, Valparaiso.
                                                                Chileans receive 30 pieces of mail per year, on average.
                                                                One policy making Correos unique among world posts
                                                                is that it charges both sender and recipient. Senders
MARKET FREEDOM:                             MARKET FREEDOM:     must place stamps on their letters, while recipients must
Restricted Market                                 Free Market
                                                                pay a small fee to their mailman to receive a letter.

                                                                STRUCTURE & REGULATION
                                                                The Chilean Post Office has been an autonomous but
                                                                wholly state-owned company since 1982. It is managed
                                                                by a five-member Board of Directors. These directors are
                                                                appointed by the nation’s public enterprise system (SEA).
                                                                As of 2006, Correos had approximately an 80 percent
                                                                share of the market for regular mail and a roughly
                    MARKET COMPETITION:                         17 percent share of the domestic package and courier
                       Not Competitive
                                                                market. It reported a profit of roughly US$4 million
                                                                for that year. The company has over 5,000 employees,
                                                                200 post offices, and 300 authorized agents stationed
                                                                throughout the 2,500-mile-long mainland and the
                                                                country’s insular possessions in the Pacific, which
                                                                include Easter Island.
Chile is divided into 13 mail zones (designated by roman numerals) plus the Metropolitan Region (MR). Pickup
from mail drops (buzon) is once a day.
In 2007, Correos delivered over 400 million pieces of mail, including 6 million parcels. The company’s 2,300
letter carriers operate a fleet of 1,480 bicycles, 400 vans, and 100 motorbikes to deliver mail and packages. Until
recently, mail volumes were inching up, but the average Chilean receives only 30 pieces of mail per year. In 2008,
Correos experienced an abrupt contraction of volumes. In October 2008, mail deliveries plunged 5 percent.
Further declines have been projected, which has caused Correos to scale back its plans for expansion.
Notably, Correos maintains mail service to the South Pole.


The radical free-market reforms undertaken during the Pinochet military regime from 1973 through 1990 have left
a lasting imprint on Chile’s economy. They remain hugely controversial. With the notable exception of the nation’s
copper production, large swaths of Chile’s government enterprises were privatized over those decades.
Aside from Correos, only about 20 firms remain under the nominal control of the Public Enterprise System (Sistema
de Empresas Publicas -- SEP). Most are regional water, sanitation and port companies, while others include the
Santiago subway (Metro), tax-free zones (Zofri), the state lottery (Polla) and the railroad operator EFE.
These public companies are expected to contribute a percentage of their profits to the state budget and to
undertake initiatives that impact Chile’s social welfare. They are not expected to offer profit incentives sufficient
to attract private-sector companies. There is little market scrutiny of internal finances, so it is difficult to gauge
whether state companies which claim profitability are actually profitable.
It is common for Latin American governments to appropriate the “terminal dues” paid by foreign posts to cover the cost of
delivering foreign mail. It is not clear to what extent these dues are passed on to the national post for delivering foreign mail.
Restructured in 1982 as a government company, Empresas de Correos de Chile was not privatized. Like some other
government entities, Correos is authorized to issue bonds which are not guaranteed by the state; this brings limited
private capital into play. Further privatization is unlikely because the country’s central labor federation (known in
Chile as CUT) remains so powerful that the “syndicales” (unions) are virtually a partner in the national government.
Within Correos, labor relations are good, as the unions are routinely included in management decisions. Working
conditions seem almost as important as financial results. For instance, the tasks of mailmen were recently
reclassified as “heavy labor” within national regulations, and postmen were granted pay increases as a result.
Correos has been able to institute performance-based pay.

Correos is the universal service provider but has competition in niche markets, primarily in the Metropolitan
Region of Santiago. Private companies Envia and WSP each handle roughly five percent of total regular mail
volume. Some 100 other companies also are in the mail business. In the more competitive express and package
markets, Correos competes aggressively against domestic and international rivals.
According to a 2003 study by SkyPostal, Correos’s mail delivery times are subpar. Overall, just 61.7 percent of mail
reaches its destination within 30 days of posting. The average transit time for a letter is more than nine days.

In regular mail, Correos offers two delivery options on envelopes up to 500 grams -- 72 hours or five business
days. Price is based on weight and delivery time. Certified mail can be sent express (24-48 hours), priority (3
days), or standard (5 days). Registered mail takes 5 days with confirmation of delivery.

18   Consumer Postal Council | Index of Postal Freedom | 2012
                     C O R R E O S                                     D E               C H I L E

PRODUCTS & SERVICES                                (CONTINUED)
Uniquely, since 2004, Correos also charges the recipient for each piece of mail delivered. This distribución y
carteros fee is officially listed at 30 pesos, or roughly 5 U.S. cents. Postmen are authorized to negotiate a target
monthly fee with each customer based on the average number of letters that customer receives. If a consumer
refuses to pay the postmen to receive his mail, Correos is entitled to suspend mail service to the delinquent
person. He must then pick up his mail within 30 days from a Postal Distribution Center.
Correos has been aggressively expanding into the courier, express, and package delivery market (the segment
known as CEP). The company had a 15 percent share of this market in 2006 and had hoped to reach a 40 percent
share by 2010, but such projections are now in jeopardy. A six-year joint venture with TNT came apart at the
beginning of 2009, so Correos relaunched its own express, document, and package services. TNT, meanwhile,
has purchased another established Chilean private carrier (Lit Cargo) to shore up its business in the country. The
combined TNT-led firm will control almost 40 percent of the Chilean express-delivery market.
Express “docpak” courier services (Mensajeria) are available for deliveries up to one kilogram with delivery by
motorbike. Telephone delivery confirmation is available for a surcharge. Such deliveries can be insured by value.
Within the Metropolitan Region, there are also package courier services -- up to 30 kilograms -- with several
delivery options and online tracking.
Nationwide, Correos’s express services (Servicios Expresos) delivers within 24-48 hours and offers online
tracking and insurance. Non-express packages or Encomiendas up to 30 kilograms can be delivered nationwide
in three to eight days based on weight, origin, and destination. Volume discounts are available for businesses
which ship more than 500 such packages monthly.
Correos also provides International Courier delivery for docpaks up to two kilograms and packages up to 30
kilograms with guaranteed delivery times, online tracking, and included insurance. Correos has state-of-the-art
online services such as tracking (seguimiento) and preshipment price quotes (cotacion).
Money transfers are also a major market for Correos. In addition to its joint venture with Western Union, Correos
is also working closely with Transbank on money transfers (giros). In July 2008, Correos signed an agreement
with Spain and Uruguay to set up an international electronic money transfer system. Within the country, money
may be transferred electronically -- and picked up as cash at a post office -- within 4 hours in most locations.
The company also negotiates large-scale deliveries of pensions, subsidies, and loan repayments. There is even a
loan service for customers available upon application (Facturas y notas de crédito clientes empresa).
According to a survey of postal services in Latin America conducted by the bank of Thailand, Correos de Chile
has not ventured into many of the financial services that other postal services around the world have introduced
-- namely savings, insurance, and consumer credit.

Correos de Chile claims to be in a reasonably good position to withstand the economic downturn. There is little
expectation that Correos will be privatized. But it is clear that Chile’s national post will continue to compete
aggressively against both foreign and domestic rivals.


20 Consumer Postal Council | Index of Postal Freedom | 2012
                                                              C H I N A                         P O S T

                    MARKET COMPETITION:
                      Very Competitive
                                                              China’s postal service, China Post, has among the
                                                              largest delivery networks in the world, with 77,000
                                                              post offices. Its more than 500,000 postal employees
                                                              serve China’s 1.3 billion inhabitants, delivering over
                                                              7 billion letters and 95 million parcels annually and
                                                              generating over $7 billion in revenue (2005 statistics).
                                                              Today’s China Post dates from the founding of the
                                                              Communist regime in 1949. The postal service for
                                                              decades remained an appendage of the government.
                                                              Only in the 1980s, when China moved toward
MARKET FREEDOM:                           MARKET FREEDOM:     limited liberalization, were big state units formally
Restricted Market                               Free Market
                                                              restructured as stated-owned enterprises (SOEs) and
                                                              given a degree of operational freedom. But SOEs were
                                                              by no means set free -- they remain wholly controlled
                                                              by the Communist Party and subject to its largely
         China                                                opaque decision-making processes.
                                                              Because of its size and complexity, China Post was the
                                                              last large state organization to be restructured as an
                                                              SOE. However, additional reform of the postal service
                                                              has stalled. Moreover, since postal rates have been kept
                                                              artificially low, traditional mail services operate at a
                    MARKET COMPETITION:
                       Not Competitive                        loss and require subsidies.
                                                          China Post has long provided services beyond mail
                                                          delivery, the most important being money deposit and
                                                          remittance. Hundreds of millions of Chinese keep their
                                                          savings with the Post, even though it pays very low
 or, with inflation, even negative rates of interest. Migrants from rural China regularly use the Post to send
 an estimated $30 billion in remittances back to their inland families. Until 2003, the Post was required to keep
 its deposits in state banks. Such banks were directed to pay a slightly higher (state-controlled) interest rate on
 Post deposits. The difference between what the Post paid out and what it earned on deposits long provided the
 primary subsidy to support universal mail service.
 The last ten years have witnessed a whirlwind of modernization in China with a growing economy, increasing
 cash reserves, and China’s entry into the WTO. With the passage of a limited and still vague postal reform
 bill in 2005, parts of the postal sector have come alive. What is now the China Post Group (still owned by the
 state) has been active in protecting its traditional monopoly on personal domestic mail under 350 grams and
 leveraging its network to hold on to exploding new markets.


As the red-hot Chinese economy has sprinted forward, reform of the traditional mail system is still in
the initial stages. Modernization and competition have taken place in economically vital sectors of courier
service (business express mail), electronic communication, and banking. China Post still maintains a legal
-- if hotly contested and often unenforced -- monopoly on mail and parcels weighing 350 grams or less.
Profitable intra- and inter-city express mail service (EMS) has been the main battleground, where local and
foreign competitors face formidable opposition from regulators loyal to state-owned China Post.

Until 2005, the State Post Bureau had a dual role -- it was both the regulatory authority on all postal matters
and the organization which delivered the mail. In every area it could control, it has been slow to innovate and
sought to block potential competitors from breaching its monopoly.

China Post did establish its own Express Mail Service (EMS) in 1980, recognizing it as a high-potential
market. Since China Post had no international capacity, international EMS was opened to foreign carriers
in the mid-1980s. But those carriers -- including FedEx, UPS, DHL and TNT -- were prohibited from
handling domestic EMS until roughly 1995. Since that time, foreign carriers have lobbied to extend their
reach into Chinese domestic markets. Thousands of local Chinese carriers have also sprung up, serving
cities and high-volume routes, often on a semi-legal basis. Meanwhile, China Post has sought -- through
subsidiaries and joint ventures -- to participate in lucrative international markets, primarily intra-Asian
express mail and package delivery.

Efforts to open up China’s domestic mail market and to establish the long-term legitimacy of local carriers
have largely failed. Legislation to reform the postal system has been drawn up by China Post insiders who
sought to protect China Post monopolies and to tilt the playing field in lucrative emerging markets. In effect,
China Post itself drew the line between what in China are called “Post-exclusive” and “non-Post” services
-- services which foreign and local carriers alike claimed should be opened to full competition under WTO.
These competitors to China Post complained that a sector operator -- the subsidized Universal Service
Provider of traditional mail service -- should not be allowed to set the rules for an entire industry.

The last three years have seen an explosion in non-mail services provided by China Post -- primarily banking
and financial services. Such services are closely linked to industrial development and are profitable for China
Post. Besides express mail, savings banks, remittance transfers, Internet banking, and logistics services -- all
leveraging the ubiquitous China Post network of post offices -- have evolved at breakneck speed. Moreover, the
China Post network is established in rural China, and so the government has used the China Post infrastructure
as a conduit to bring small loans, insurance, ATMs, and Internet transfers into the back country.

Life insurance sales represent the next business venture for China Post. In June 2008, China Post Group
received the go-ahead to launch China Post Life Insurance Company Limited. The new company has stated
that it will target farmers, low-income urban residents, and migrant workers in particular.

22 Consumer Postal Council | Index of Postal Freedom | 2012
                                                          C H I N A                            P O S T

LIBERALIZATION & PRIVATIZATION                                         (CONTINUED)
Postal regulatory functions were separated from postal business functions of the State Post Bureau with the
creation of China Post Group (CPG) in December 2006. On the one side, the State Post Management Bureau
(SPMB) was set up as the agency which regulates postal services nationwide. On the other, CPG, with registered
capital of 80 billion yuan (about US$11.5 billion), was established as the operational arm with four segments:
postal services, logistics and express services, private document services, and financial services. Still wholly
owned by the state, CPG has launched subsidiaries which have entered into joint ventures with domestic and
foreign companies. Certain profitable units have even been packaged for limited IPOs to raise private capital, but
the fact that the state continues to play such a large role in ownership has scared away most potential investors.

There is virtually no nationwide competition in the core letter mail business because postage prices are held
low for political reasons. A letter can be sent from Shanghai to Yili, some 4,500 km away, for what amounts
to pennies. China Post still holds roughly 90 percent of the domestic market, although it has faced the most
pressure in emerging industrial centers.
Today, however, there are over 100,000 foreign and non-state express mail service providers that carry out about
80 percent of same-city express mail delivery and over 50 percent of trans-province business express mail
services. Such firms can handle mail under 350 grams so long as it is not personal mail. Foreign firms like DHL,
UPS, TNT and FedEx have taken most of the international freight forwarding market. China Post, through a
co-operative agreement with Dutch TNT, holds only about 25 percent of that business.
New legislation may give China Post’s Express Mail Service the sole authority to handle documents weighing
under 150 grams, effectively forcing most domestic express companies to shut down, as 90 percent of their
business is derived from handling such small items. It presumably would prevent foreign and private firms from
handling business from online retailers.

Observers say it is unlikely that the Chinese government will allow foreign competitors significant entry into what is
considered a semi-strategic sector of the economy. Moreover, the Chinese continue to reevaluate the role of foreign
investment all across their economy in light of their strategic priorities and their obligations under WTO. Postal
reform is still “under consideration” but it appears likely that the government will promote a Chinese small package
competitor and discourage foreign companies through a variety of subtle (but still WTO-compliant) restrictions.
The most that can be expected in the medium term is legal clarification of boundaries so that the mail industry
can develop with more certainty within the booming Chinese economy.


24 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                 E G Y P T                            P O S T

                       MARKET COMPETITION:                       A 2008 paper written by Egyptian government officials
                         Very Competitive
                                                                 posited that the international postal sector has changed
                                                                 more in the last 20 years than it had in the preceding
                                                                 150. Egypt’s own postal sector is no exception. Those
                                                                 changes will no doubt accelerate as the country’s
                                                                 leaders move toward standardizing postal regulation
                                                                 and liberalizing the postal market.
                                                                 Egyptian postal leaders are pegging their hopes for
                                                                 growth on “increasing overall levels of private-sector
                                                                 investment in the postal market through open and
MARKET FREEDOM:                              MARKET FREEDOM:     fair competition and progressive regulation.” Officials
Restricted Market                                  Free Market
                                                                 would also like to make Egypt into a regional hub for
                                                                 logistics by marshaling the assets of the state-owned
                                                                 Egypt Post (EP), various government agencies, private
                                                                 postal operators, and other interests.
                                                                 The earliest organized mail systems in human history
                                                                 actually have their roots in Ancient Egypt. Records of a
                                                                 cuneiform post date back to 1364 B.C. More than 2,000
                                                                 years later, in the 12th century A.D., Egyptians created a
                                                                 primitive airmail network using carrier pigeons.

                       MARKET COMPETITION:                       The modern-day Egypt Post traces its lineage to 1865, when
                          Not Competitive
                                                                 Viceroy Ismail purchased Posta Europea, the dominant
                                                                 private postal service in Egypt at the time, from its Italian
                                                                 owners. In 1874, Egypt became one of 22 countries that
                                                                 contributed to the founding of Universal Postal Union.

Today, Egypt Post operates under the National Post Authority, which is controlled by the Ministry of
Communications and Information Technology (MCIT), established in 1999. EP employs nearly 50,000 people.
As government employees, postal workers are not unionized.
EP maintains 4,600 branches. All of Egypt’s commercial banks combined do not have as many outlets. But mail
services account for only 40 percent of the post’s revenues; financial services provide about 50 percent.
Due to high migration rates from rural to urban communities within Egypt, EP handles a significant amount
of personal correspondence between separated family members as well as local money orders sent home as
remittances. Additionally, Egypt is one of the top three providers of foreign laborers in the rich countries
bordering the Persian Gulf. Many of these workers use EP to remit money to their families back in Egypt.


Per-capita mail volume in Egypt is only 3.2 pieces per person per year. That’s low by international standards, as
its peers in terms of GDP per inhabitant exhibit much higher rates of mail utilization. The country immediately
above Egypt in this category exhibits mail volume of 5.8 pieces per person per year; the country immediately
below, 5.0 pieces per person per year.
On average, EP delivers once a day in urban areas and once a week in rural areas. Domestic delivery times outside
of major commercial routes remain erratic. Service standards are practically nonexistent.
International mail comprises an increasingly important part of Egypt Post’s mail stream. The volume of EP’s
inbound and outbound international letter mail today is approximately equal to its domestic volume.

Nominally, Egypt Post holds a monopoly on letters and parcels smaller than 2 kilograms and on national
money orders. However, the postal market is relatively dysfunctional. According to a strategy document
from the MCIT, “the postal market in Egypt is performing below potential and not fully meeting the needs
of individual and business mailers.”
MCIT has called for a bolder liberalization program but cautions that “liberalization needs to be accompanied
by enhancement of public operators’ efficiency and effectiveness.” There is no serious discussion of
dismantling or privatizing the EP.

Despite EP’s monopoly, MCIT characterizes the Egyptian postal market as having a “high level of competition
with 12 operators providing various forms of postal services.” Competition within the high-value parcels, express
mail, and logistics sectors is vigorous.

Egypt’s postal market is loosely regulated. By law, the Egyptian National Postal Organization (ENPO) issues
licenses to postal operators. But ENPO also competes in the postal marketplace as Egypt Post. In other words,
Egypt Post is both postal regulator and state-owned postal operator. MCIT characterizes the situation as one where
“there’s simply no effective licensing regime to legitimize competition in the market.” Many private postal operators
function without licenses. Those entities that are licensed tend to offer services beyond the scope of their licenses.
MCIT notes that the regulatory structure must be fixed. According to its strategy document, “the significant
lack of transparency concerning the separation between the regulatory and operator functions of ENPO has
affected the predictability of the sector and thus the level of private sector investment.”
Egypt Post is considered the universal service provider. But according to MCIT, “there are no regulations
concerning fulfillment of universal service obligations.”

26 Consumer Postal Council | Index of Postal Freedom | 2012
                                                          E G Y P T                           P O S T

EP is working to bring domestic delivery up to international standards. But with mail volumes worldwide
continuing to decline, that effort may have minimal impact on EP’s prospects. Strategists project that growth
-- both for EP specifically and for Egypt’s postal sector as a whole -- will flow from improved parcel delivery
and expansion of the Post’s financial services offerings, particularly digitally, through the existing post office
network. Managers see these initiatives as a way to generate additional revenue for EP, given the likelihood that
consumers will not readily pay more for traditional mail delivery.
Ninety-seven percent of Egyptian transactions are still made in cash, and only 10 percent of Egypt’s population
has bank accounts. Planners see the EP network as a development tool for extending government services to the
public and drawing more Egyptians -- especially the poor and marginalized -- into the civil and economic life
of the country. This vision includes a wide range of services. Already, Egyptians can deposit savings, withdraw
cash, draw down pensions, pay certain bills and taxes, buy airline tickets, and process certain licenses at many post
offices. Egypt Post’s leaders would like to expand these services.
These efforts are well underway. For instance, the EP unit GiroNil, a joint venture with Egypt’s Banc Misr
and a Dutch processing firm, is rapidly developing an extensive network of internet hubs, ATMs, and mobile
banking capabilities.
Partnerships like these are at the heart of MCIT’s plans for developing Egypt Post. Given the rapid pace of
change that has characterized Egypt’s postal market over the past two decades, Egypt Post has momentum to
proceed apace with further significant changes to its operations and business strategies in the years to come.


28 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                            L A              P O S T E

                    MARKET COMPETITION:                          La Poste -- the French government-owned postal
                      Very Competitive
                                                                 service -- is the third-largest national post in the
                                                                 world, with 2010 revenues of over €20.9 billion.
                                                                 Components of La Poste include traditional mail
                                                                 delivery, express and parcel delivery, and a financial
                                                                 division, which provides basic banking services.
                                                                 Despite this menu of diverse offerings, mail still
                                                                 accounts for over half of La Poste’s revenues.
                                                                 Financial services are becoming increasingly
                                                                 lucrative, as nearly a quarter of La Poste revenue is
                                                                 derived from this relatively new offering.
MARKET FREEDOM:                              MARKET FREEDOM:
Restricted Market                                  Free Market   With over 275,000 workers, La Poste is among the
                                                                 largest employers in France. Although state-owned,
                                                                 its operations have been commercialized -- so it
                                                                 competes against private companies -- and it holds
                                    France                       stakes in some foreign postal operators.
                                                                 In February 2010, the French government passed
                                                                 legislation transforming La Poste into a limited
                                                                 liability company owned by the state. The law also set
                                                                 the terms under which the French postal market would
                                                                 operate after liberalization in January 2011.
                    MARKET COMPETITION:

                       Not Competitive

                                                                 Liberalization of the French postal market has come
                                                                 in stages. The market for mail weighing more than
                                                                 100 grams was completely liberalized in 2003. The
                                                                 market for mail above 50 grams was opened in 2006.
                                                                 France had been among those most loudly calling
                                                                 for postponement of the EU’s deadline for total
                                                                 liberalization of postal markets. The initial deadline for
                                                                 liberalization was pushed back two years to 2011. But
                                                                 as of the beginning of that year, La Poste no longer
                                                                 has a monopoly on mail weighing less than 50 grams.

Labor groups consistently opposed liberalization of the mail market. In response to La Poste’s drift
toward competition and privatization, postal unions staged a nationwide strike on September 23, 2008. The
demonstration involved 27 percent of La Poste workers, according to company management.


Privatization of La Poste remains unlikely in the foreseeable future. Since 1991, La Poste has been considered an
autonomous agency providing a public good. Thus, it is government-owned but independently run, with a board
of directors and a regulatory structure overseeing its operations.
The French state distributes subsidies to La Poste, mostly in the form of tax exemptions. There is little chance
of this trend lessening. In addition, La Poste enjoys an unlimited line of credit with the French government.
Despite opposition by French postal unions, La Poste became a limited liability company with public ownership on
March 1, 2010. The French Constitution forbids the government from owning less than 50 percent of La Poste.

France’s mail market is liberalized, so La Poste faces competition. However, La Poste dominates the market for
letter mail. Foreign and domestic package firms compete with La Poste for parcel and express revenues. So far, at
least 19 such firms have been licensed by ARCEP, the French postal regulatory authority.
Because of its presence in package markets, as well as its robust financial services business, La Poste faces competition
in non-postal sectors. La Poste claims that 73 percent of its revenue in 2010 came from markets open to competition.

Since the revision of France’s postal laws in 2005, La Poste has been under the regulatory authority of ARCEP, or
the Autorité de Régulation des Communications Electroniques et des Postes, an independent administrative authority.
The Autorité’s executive board is composed of 7 members. Three are nominated by the President of the
Republic, two by the President of the Senate, and two by the President of the National Assembly. Their
terms are six years in length and are not renewable.
ARCEP’s regulatory authority is wide-ranging. Not only does ARCEP regulate the postal market, it is also
the overseer of the French telecommunications market. ARCEP ensures that the universal service function is
carried out, that the liberalization agenda of the EU is adhered to, and that the postal market generally functions.
ARCEP is also responsible for licensing firms to compete with La Poste in liberalized business areas.

La Poste is the designated universal service provider in France through January 1, 2026, according to the February
2010 law. ARCEP supervises this obligation. A unique component of La Poste’s universal service obligation is
the requirement that no more than 10 percent of a given municipality’s (or département’s) population may be
more than five kilometers away from a post office.
In France, the universal service obligation comprises letters up to two kilograms, parcels up to 20 kilograms, and
newspapers up to two kilograms. It also includes recorded mail and valuable consignments.

30 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                         L A               P O S T E

UNIVERSAL SERVICE                        (CONTINUED)
In addition, regional post offices can draw upon a geographic equalization fund. Through this fund, tax
revenue from more profitable urban post offices is used to subsidize the extra expense of maintaining the
universal service obligation in less profitable rural areas.
The February 2010 law established a fund for financing universal service in France. Licensed postal operators
must contribute to the fund according to the amount of mail within the universal-service area that they carry.
La Poste has the right to negotiate agreements not governed by the universal service obligation with bulk
mailers, consolidators, and firms licensed to deliver mail in France.

Like many postal operators in Europe, La Poste has launched an integrated Postal Bank, offering a multitude
of financial services. In 2005, the laws governing La Poste’s bank were revised to allow it to perform, not
just retail banking, but more complex transactions, such as issuing home mortgages. La Banque Postale has
more than 10 million customers and reported a net banking income of €5.215 billion in 2010, with credit
outstanding over €6.1 billion at the end of December.
La Poste is also involved in a number of government-related operations, such as distributing social benefits like welfare.
As of April 2010, La Poste offered consumer credit and was working to expand into personal loans. In
December 2010, La Poste unveiled its first range of casualty insurance, which includes car insurance,
home insurance and legal protection.
La Poste’s financial services business accounts for nearly a quarter of annual revenue.


32 Consumer Postal Council | Index of Postal Freedom | 2012
                                          D E U T S C H E                                          P O S T

                    MARKET COMPETITION:
                      Very Competitive
                                                                  Deutsche Post -- under the umbrella name Deutsche
                                                                  Post DHL -- is the largest mail operator in Europe,
                                                                  delivering roughly 70 million pieces of mail six days
                                                                  a week in Germany. With about 500,000 employees
                                                                  worldwide, it is also one of the globe’s largest
                                                                  employers. Its revenues totaled €64.4 billion ($82.85
                                                                  billion) in 2009. Deutsche Post has also become the
                                                                  world’s largest logistics company.
                                                                  The German postal service is unique in being one
                                          Germany                 of the first European services to be converted from
MARKET FREEDOM:                             MARKET FREEDOM:       a completely state-run organization into a semi-
Restricted Market                                   Free Market
                                                                  independent, semi-private business. Moreover, as early
                                                                  as the 1990s, Deutsche Post was the first “national”
                                                                  postal service to pursue an aggressive strategy of
                                                                  expansion and diversification beyond its home country.
                                                                  The growth of Deutsche Post beyond Germany has
                                                                  been controversial. Some maintain that the company’s
                                                                  acquisitions and rapid worldwide expansion into
                                                                  the private sector have been paid for by its “trapped”
                                                                  residential mail customers within Germany. DP has
                                                                  long opposed full competition in its domestic market,
                    MARKET COMPETITION:
                       Not Competitive                            but Germany was among the first European countries
                                                                  to comply with EU directives to liberalize their postal
                                                                  markets; it did so in January 2008. The European
                                                                  Commission’s Third Postal Directive had called for
                                                                  full liberalization of European postal markets by
                                                                  January 2009. Since then, European policymakers have
                                                                  postponed that deadline several times.

DP has received state subsidies. Critics have maintained that these state monies were used to shore up the firm’s
loss-making parcel service. Legal battles have ensued for the better part of a decade. In 2002, the European
Commission ordered DP to return the subsidies. But six years later, an EU court ruled that DP could reclaim the
subsidies with interest, as competition authorities had failed to prove that subsidies were illegitimate. An appeal
by the European Commission in 2010 was denied.
DP and its labor unions opposed the opening of Germany’s postal market and have gone to great lengths to
limit competition, emboldened by the reluctance of other European nations – notably France – to revoke their
own domestic monopolies.


In November 2007, the German government instituted a minimum wage for letter carriers, with the support of
both Deutsche Post and its unions. The minimum wage put competitors at a significant disadvantage by preventing
them from paying lower wages, effectively re-granting a letter-delivery monopoly to Deutsche Post.
Competitors, led by TNT, challenged the law in German court. They were vindicated in January 2010, when a
German court nullified the minimum-wage regulation.
There is no doubt that the aggressive Deutsche Post will continue to be a major player in a broad range of world
markets -- mail and package delivery, business logistics, banking, communications, and finance. To this point,
Deutsche Post has shrewdly grown by leveraging a huge domestic revenue base that few of its competitors --
private or national -- can match.

Reform of the post-war German postal service in West Germany was already underway well before the
reunification of the two Germanys in 1990. The postal system of West Germany was officially reunited with
the virtually bankrupt East German system in 2000.
The postal service was split up in 1989 into three units, but the critical transition came in 1995 -- the
so-called “second wave” of the orchestrated German liberalization policy -- when those three units were
officially converted into private stock companies -- Deutsche Post AG (DP), Deutsche Postbank AG, and
Deutsche Telekom AG (AG stands for “stock company” in German). A large block of DP shares was put
on public exchanges in November 2000.
The new “private” Deutsche Post began a whirlwind round of investments and acquisitions beyond German
borders, seizing upon new business opportunities across Europe and beyond.
In 1998, DP acquired Global Mail (USA) the largest and fastest-growing private provider of mail services in the
North American market. A Swiss logistics company, Danzas, was snapped up in 1999.
Although the traditional German postal bank had been split off from the postal service in 1989, the German
government allowed Postbank AG to come back to Deutsche Post AG in 1999 as a subsidiary when Berlin
sold its government shares of the bank (both giro money transfer service and the savings bank) to Deutsche
Post AG. At the beginning of 2009, DP sold Postbank in order to “sharpen its focus on the core divisions
Mail and Logistics.”
Although DP officially went public in 2000, share stakes in the company were retained by various government
bodies. As a semi-public, semi-private entity, DP acquired a 25-percent stake in DHL International Ltd., the
worldwide market leader in international courier shipments.
In 2002, DP was granted a license to deliver mail in the United Kingdom, the first company to break the Royal
Mail’s long-standing monopoly. That same year, DP took over 100 percent of DHL to consolidate its growth
strategy in express delivery. But in 2009, the company sold its domestic express business in the United Kingdom.

34 Consumer Postal Council | Index of Postal Freedom | 2012
                                      D E U T S C H E                                        P O S T

LIBERALIZATION & PRIVATIZATION                                      (CONTINUED)
In a move aimed at breaking into the enormous American market, DP acquired the #3 American delivery company,
Airborne Express, in 2003 and integrated it into DHL as DHL Express. DHL itself was rebranded as DHL
Global Mail the following year, bringing a broad range of international mail services under integrated control.
But in 2008, DHL announced that it would cease domestic delivery in the United States. By 2009, DHL had
terminated its intra-American delivery service. However, DHL still delivers international parcels to American
destinations and carries American goods to foreign delivery points.

Roughly two-thirds of DP shares are “free floating” shares, open to market fluctuations since November of 2000.
The remaining third are held by the German government-owned development bank, the KfWor Kreditanstalt
für Wiederaufbau (Reconstruction Credit Institute), which dates back to the Marshall Plan after World War II.
These latter shares are not on the market.
Deutsche Post DHL is the name under which the company appears in public, e.g. in advertising. Deutsche Post AG is
the company’s legal name. Dividends on DP stock are tax free for residents of Germany. Shares of Postbank were put
on the market in a spectacular IPO in June of 2004. DP retains an ownership stake in Postbank.
DP operates through two brands (DHL and Deutsche Post) and five business divisions.
The mail division delivers approximately 70 million letters six days every week in Germany and provides services
across the entire mail value chain, including production facilities at central hubs, sales offices and production
centers on four continents, as well as direct connections to more than 200 countries.
The express division -- under the DHL brand -- transports courier, express, and parcel shipments all over the
world, combining air and ground transport.
The logistics division -- also operating primarily under DHL brands (DHL Global Forwarding and DHL
Exel Supply Chain) -- provides a range of international logistics services via long-term contracts with major
multinationals across a wide range of industrial sectors.
The services division includes the corporate center, global business services, and retail postal outlets.

At the time of the first postal reform in 1989, the three units of the old Deutsche Post were overseen by a federal
ministry -- the Bundesministerium für Post und Telekommunikation. However, that centralized ministry was
dissolved in 1998 in favor of a more decentralized new federal “net” agency (Bundesnetzagentur) which reported
to the ministry for economics and technology. Other secondary functions from the old regime were split to the
federal ministry of finance and the federal ministry of the interior.


REGULATION & UNIVERSAL SERVICE                                              (CONTINUED)
A new non-ministerial support institution -- Bundesanstalt für Post und Telekommunikation -- was also created,
which is responsible for diverse legal services as well as benefits for former postal civil servants.
Deutsche Post contracts with the government as the nation’s universal service provider.
According to the postal administration law (Postverwaltungsgesetz, abbreviated PostVwG), mail service is to be
financially self-sufficient and to be administered in “the interests of the German national economy.”

There are hundreds of commercial mail distributors in the country. German mail boxes are not the
exclusive property of Deutsche Post. DP’s monopoly on letter mail formally ended on Jan. 1, 2008. Actual
competition has been slow to take root.

Postage for a standard letter, up to 20 grams, costs the sender €0.55 (US$0.70), while a letter up to 50 grams
costs €0.90 (US$1.14). DP lost its exemption from Germany’s value-added tax (VAT) in March 2010, but DP
executives say that commercial and bulk consumers shouldn’t expect to see their product costs increase. Since
July 2010, DP has been subject to VAT. If the company carries those costs itself, analysts project a hit to annual
earnings of €150-€300 million (US$190-US$381 million). The previous tax break had given DP an advantage
of some €500 million (US$635 million) over its competitors.

Express delivery and package markets are already open. Competitors including the PIN Group and the Dutch-
owned TNT Post maintain a noteworthy presence in the residential mail market, but DP still dominates.

Deutsche Post has ambitious growth plans. It is already a world leader in the market for transport, logistics,
and communications services. The company has identified growth opportunities outside Germany and has
enthusiastically embraced technology in all parts of its business, from delivery to financial services. With its
branded DHL services, DP continues to grow in Asia.

In 2010, DP hopes to expand its network across Germany and to increase its availability to private customers
by adding 4,000 additional points of sale, 2,000 additional mailboxes and 150 additional packstations.

Deutsche Post has also made a significant commitment to improving the environment. As part of its GoGreen
initiative, DP aims to cut its carbon emissions -- and those of its subcontractors -- by 30 percent by 2020
compared to a 2007 baseline. DP also offers a carbon-neutral shipping service.

36 Consumer Postal Council | Index of Postal Freedom | 2012
                                    D E U T S C H E                                       P O S T

As the volume of traditional letter and parcel mail shrinks, Deutsche Post continues to look for new revenue-
producing projects. For instance, Deutsche Post has begun selling “Internet letters,” which are said to be safer
and more reliable than standard e-mails. DP hopes that businesses will turn to Internet letters to send secure
official correspondence. A hybrid mail option for printed delivery is also available.

Despite these new offerings, the company’s success may ultimately hang on its mail products. Of all the
products DP offers, mail posts the highest profit margin. Sustained growth will require fatter profits from its
express, logistics, and freight forwarding arms.


38 Consumer Postal Council | Index of Postal Freedom | 2012
                                            M A G Y A R                                    P O S T A

                    MARKET COMPETITION:                       The Hungarian Post Office (Magyar Posta) is a state-
                      Very Competitive
                                                              owned and operated company with no true competitors
                                                              in the market for regular mail delivery.
                                                              The Hungarian Post claims a long history of mail
                                                              delivery in central Europe dating back to the 16th
                                                              century. It claims to be the first postal service
                                                              worldwide both to introduce the postcard and to use
                                                              “motorcars” to deliver the mail.
                                                              Presently, reform of traditional mail in Hungary is lagging.
                                                              Reform measures are subject to the heavy procedural
MARKET FREEDOM:                           MARKET FREEDOM:
                                                              burdens of the 1993 Maastricht Treaty governing all
Restricted Market                               Free Market   liberalization efforts of the European Union, which
                                                              admitted Hungary in 2004. Mail reform remains bogged
                                                              down in studies, mandated social dialogues, and meetings.
                                                              Further, as is common elsewhere in Europe, many
                                                              stakeholders in Hungary oppose liberalization reforms.
                                                              In 2007, Magyar Posta enjoyed operating profit of 5.39
                                                              billion Hungarian forints ($27 million) and profit before
                                                              tax of 5.66 billion Hungarian forints ($28.4 million).
                                                              Letter mail accounted for 92.56 billion Hungarian
                                                              forints of revenue ($464 million) in 2007. Financial
                                                              services accounted for 50.64 billion Hungarian forints
                    MARKET COMPETITION:
                       Not Competitive                        ($254 million) in the same year.
                                                              In January 2011, Magyar Posta increased prices by 4.8
                                                              percent. A domestic “priority” letter costs 0.40 euros,
                                                              or 115 Hungarian forints. Standard non-priority letters
                                                              cost 0.33 euros, or 90 forints.

The Hungarian Post Office claims that it achieved official independence from government control by the Act of
1908, when Hungary was still a part of the Austro-Hungarian Empire. After World War II, the Post became
an organ of the Communist government, which took power with the Soviet occupation of Hungary in 1945. In
1983, before the end of Russian domination, the Hungarian Post was split off from direct central government
management as the Hungarian Post Centre. In 1990, broadcasting and telephone services were separated from
the post office, which was reconfigured as the Hungarian Post Office Company.
This arrangement was modified at the beginning of 1994, when the Hungarian Post Office, Ltd., began operations.
This company is the state-owned successor to the Hungarian Post Office Company and ultimately reports to the
Hungarian Minister of Transport, Communications, and Water Management.


OWNERSHIP & STRUCTURE                                 (CONTINUED)
In 2002, another significant restructuring process was launched. This resulted in a system of three administrative
regions and division of labor into three broad classes: strategic and administrative, operations, and internal
services like human resources.
Magyar Posta also has set up “mobile post offices” for 950 smaller communities. These mobile post offices are
trucks that visit small towns to offer the full range of postal services in lieu of bricks-and-mortar establishments.
A further 1,000 conventional post offices of the 2,841 currently in use were targeted for closure in 2009 in favor of
these mobile post offices. As a result of these closures, the workforce will be subject to continued paring.

In some senses, Hungary has led the way among former Soviet satellite states in advancing market reforms. After
the fall of the Soviet Union, the government launched a basic program of privatization, which ended on schedule
in 1998. Eighty percent of GDP is now produced by the private sector. Hungary has experienced growth in
foreign investment, with cumulative foreign direct investment totaling more than $60 billion since 1989.
Postal liberalization has advanced slowly; the state-owned post still possesses a monopoly on letters under 50
grams. In 1992, Act XLV allowed private companies who had won concession tenders or permission from the
government to compete with Hungarian Post in providing basic postal services. The law was meant to open the
market, but Magyar Posta remained more or less a monopoly.
In 2001, Act XL established a framework for a gradual transition toward liberalization. This act
resulted in numerous market entries.
In 2007, the EU allowed Hungary to postpone effective liberalization of its postal marketplace (i.e., the removal
of its monopoly on letters under 50 grams) until 2013.
Magyar Posta has launched some self-directed privatization initiatives, like the “Post Partner Programme,”
wherein post offices are operated by private actors. The national post now operates 90 percent of post offices; it
expects that figure to drop to 60 percent by the conclusion of the program.
Additionally, in July 2011, Magyar Posta announced a 759.5-million-forint public procurement tender for media
buying and planning which will include placing advertisements and creating graphics for the company.

Well-known multinational companies such as TNT, DHL, and UPS are all very active in Hungary in the markets
for package and express delivery, but there are virtually no significant competitors to Magyar Posta in traditional
mail. In 2005, the state-owned national post employed more than 38,000 people, or 97 percent of those who work
in the sector. Magyar Posta’s 2007 annual report claimed 36,429 employees, 34,995 of whom were equivalent to
full-time staff. Universal Postal Union data peg the 2008 workforce at just under 36,000.

40 Consumer Postal Council | Index of Postal Freedom | 2012
                                          M A G Y A R                                P O S T A

In the aftermath of Act XL, several companies registered as postal operators. In 2002, there were 18 postal
operators. By 2003, there were 43, and by 2004, there were 58. The National Communication Authority (NHH)
conducts the licensing and notification procedures related to entering the postal market.
There is very little data available on market shares in the mail sector. However, managers within Hungary estimate
that 60 percent of Magyar Posta’s revenue comes from its activities in the competitive market, while roughly 40
percent comes from its monopoly area. The share of revenue from the competitive market is continuously growing.

The EU Act CI (101) of 2003 on EU postal services basically stipulates that universal service cover domestic and
international correspondence and direct mail of 100 grams or less, as well as mail related to official documents,
unless specific exceptions are made by the government.
Magyar Posta bears the universal service obligation in Hungary.
Hungary is embroiled in the required EU Social Dialogue procedures -- ongoing negotiations between unions,
employers, government agencies and other stakeholders. With the current financial crisis, it seems unlikely that
much progress will be made in the immediate future.

The average monthly salary of a worker at Hungary Post is 156,682 Hungarian forints ($785). The average
income for a Hungarian is about $600 per month. GDP per capita in Hungary was estimated in 2007 to be
approximately $19,500 on a purchasing power parity basis.
There are nine trade unions active in the postal sector in Hungary. The most significant union is the Postal
Trade Union (Postások Szakszervezete, or PSZ), an affiliate of the National Association of Hungarian
Trade Unions (Magyar Szakszervezetek Országos Szövetsége, or MSZOSZ). The PSZ has about 20,000
members, or a little over half the workforce.
The second-largest trade union is the Independent Trade Union of Post Workers (Postások Függetien
Szakszervezete, or POFÜSZ), which represents 4,400 employees.
There have not been any strikes in the postal sector for the last 20 years, though labor and management nearly
came to blows in late 2007. Those negotiations led to a 7.5-percent wage increase for postal workers in 2008.
As might be expected, smaller postal operators have resisted unionization of their workforces, despite the efforts
of Hungary’s national trade unions.

Magyar Posta holds 135,000 customer accounts. Its product offerings include loans, investment funds, conventional
savings accounts, and life, property, travel, and car insurance policies. By October 2007, the post’s insurance
offerings had reached one million customers.


42 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                I N D I A                            P O S T

                      MARKET COMPETITION:                       The Indian Postal Service, or India Post, is a government-
                        Very Competitive
                                                                operated system. It consists of more than 155,000 post
                                                                offices scattered across India’s vast land expanse of
                                                                more than three million square kilometers and serves
                                                                a population of roughly 1.3 billion citizens. India Post
                                                                claims to be the largest postal system in the world, with
                                                                nearly 500,000 people working for the company.
                                                                Last restructured at the time of Indian independence in
              India                                             1947 from the remnants of the British system, India Post
                                                                rests on a legislative foundation laid out by the British in
MARKET FREEDOM:                             MARKET FREEDOM:     the Indian Post Office Act of 1898. The Indian Parliament
Restricted Market                                 Free Market
                                                                attempted to revise the 1898 Act in 1982 and again in
                                                                2002, but their proposed changes were never adopted. A
                                                                sweeping reform measure that would have strengthened
                                                                India Post at the expense of competitors was introduced
                                                                in 2006 but has not advanced.
                                                                India Post supplies a variety of services to the Indian
                                                                population, including small savings banking and other
                                                                financial and documentary services. It is the oldest and
                                                                largest savings bank in India and the second largest
                                                                provider of life insurance in the country. In total, financial
                      MARKET COMPETITION:
                         Not Competitive                        services provide over half of the revenues of India Post.
                                                                There have been studies by global consultants on the
                                                                paths to reform and liberalize India Post and other
                                                                critical infrastructure sectors, but real reform has not
                                                                matched the hopeful rhetoric.

India Post remains a government-owned entity operated by the Department of Posts (DoP), which is part of
the Ministry of Communications and Information Technology. India Post enjoys a state-protected monopoly
on letter delivery, but the definition of “letter” is open to interpretation. The only exceptions to the monopoly
named in the Post Office Act of 1898 are private communications delivered by the writer to the recipient, those
sent by messenger, and related notes within parcels of goods.
India Post is also not liable for lost or damaged letters, according to the statute. This protection from liability
contradicts the Consumer Protection Act of 1986. India Post has sporadically lost cases brought by consumers
alleging delinquent service, but such consumer-friendly judgments are by no means the norm.


LIBERALIZATION & PRIVATIZATION                                     (CONTINUED)
Outlines for reform have come in draft bills in 2002 and 2006. These proposals would have given India Post a
weight-based monopoly covering both letters and parcels on mail deliveries of 500 grams or less.
These draft bills would strengthen India Post’s monopoly by defining the word “letter” and explicitly barring the
private carriers that currently deliver low weight parcels from doing so. The draft legislation would also assess
a levy on private carriers to finance India Post’s universal service obligation.
The proposed 2006 bill stipulated that private carriers would have to pay a fair wage rate determined
by the government and comply with all applicable national labor laws. Such mandates essentially would
have required that private carriers adopt India Post’s cost structure. They also effectively would have
undermined any potential for liberalization.

Echoing the original British structure, postal service in India is divided geographically into 22 postal
circles (originally “routes”), each headed by a Chief Postmaster General. Within each circle there are
regions called Divisions under the control of a Postmaster General. An additional circle, the so-called
Base Circle, handles the postal needs of the Indian armed services.
The government exercises its authority through a Postal Service Board consisting of a chairman and three
members who are responsible for Operations & Marketing, Development, and Personnel. A government-
appointed Joint Secretary and Financial Advisor also attends all meetings.
Nearly 90 percent of India Post’s offices are in rural areas. According to the Planning Commission for the
Government of India, on average, rural post offices cover just 34 percent of their costs. In hilly areas, cost
coverage is just 15 percent.

Under the Indian Postal Act of 1898, the “Central Government” fixes the prices for postal services and seeks the
approval of Parliament on its decisions. This vague responsibility falls to the Postal Services Board.
India Post bears the Universal Service Obligation but receives significant subsidies from the government. Of the 23
services provided by India Post, only Insurance, Speed Post, and Foreign Mail yield a surplus of revenues.
The 2006 draft bill would have required private carriers to contribute roughly 10 percent of their revenues to a
fund to compensate India Post for fulfilling the Universal Service Obligation. This USO Fund contribution would
be a cost passed on to consumers.
Although the bill has not passed, there were rumblings that smaller companies might be required to pay less.
Observers predicted that larger carriers would split their businesses into smaller units -- losing economies of
scale -- to avoid the maximum contribution.
The bill proposed that an Independent Mail Regulatory and Development Authority be set up to level the
playing field and enforce standards.

44 Consumer Postal Council | Index of Postal Freedom | 2012
                                                            I N D I A                         P O S T

REGULATION & UNIVERSAL SERVICE                                          (CONTINUED)
There would also have been a Mail Dispute Settlement Tribunal to resolve disagreements between the Registering
Authority and the Service Providers, between the Service Providers themselves, and between Service Providers
and Consumers. India Post, under the proposed legislation, would have continued to enjoy immunity from liability
charges stemming from failed delivery.

Private courier companies have been delivering various types of written and printed communications without
calling them letters. Some 2,500 have registered with the government. At times, senders have included a small
“object” in the envelope in order to categorize it as a parcel.
The proposed 2006 bill would have restricted foreign ownership in any private courier to below 49 percent.
Private carriers operate almost exclusively in urban areas.
The market has been growing rapidly -- by 20 to 25 percent per year. Of the 16 billion items sent in India each
year, private firms deliver more than 7 billion.

Studies by McKinsey and Company have pointed out that, in the future, India Post will be a great vehicle for
public-private partnerships. Following models of liberalization undertaken in other countries, some planners
look to debundling the owner, operator, and regulatory functions of India Post.
India Post’s huge distribution network -- the largest in the world -- may be its most significant asset in any future
partnership with either private-sector concerns or with other government agencies.
The National Postal Policy statement on India Post’s web site explains that “the new economy and modern
markets require [the postal service] to become more financially autonomous and commercially flexible in order
to deliver its core functions and other services.” To that end, India Post has continued to look for new revenue-
producing projects as the volume of traditional letter and parcel mail shrinks. In recent years, for example, the
company has begun to offer gold coins, books, and mobile connections at many of its postal outposts. The Post
has also launched a partnership with ARM I-Solutions to sell railway, bus, airline, and even movie tickets at
post offices in several states. With the private firm’s “Genie Ease-Ticket” service, customers can also make hotel
reservations at select India Post outlets.
Moreover, in addition to the banking and financial services it already offers, India Post has announced plans to
open the Post Bank of India in order to expand banking services to the rural areas of the country -- in which
60% of India’s population resides. India Post is also looking to further break into the lucrative sectors of data
processing and electronic communication.
Prompted by recommendations from a study conducted by the Jamnalal Bajaj Institute of Management Studies,
India Post is also exploring technology that would make it possible to scan letters into the Post’s system for
reprint and delivery anywhere in the country.
While a large-scale restructuring of the current postal system is certainly imminent, no decisive movement
towards privatization is expected.


46 Consumer Postal Council | Index of Postal Freedom | 2012
                                          P O S                   I N D O N E S I A

                    MARKET COMPETITION:                       In August 1746, Indonesia’s first postal service was
                      Very Competitive
                                                              established by Governor-General G.W. Baron, the
                                                              country’s Dutch colonial ruler, in the capital city Batavia
                                                              (modern-day Jakarta). In 1906, post and telegraph
                                                              services were brought under the auspices of a new agency
                                                              within the colonial government -- Posts, Telegraphs and
                                                              Telephones (PTT). After Indonesia declared independence
                                                              in 1945, the new government seized control of the postal
                                                              service. In 1961, PTT was converted from an official
                                                              government agency into a state-owned company.
                                                              The public postal operator of today -- PT Pos
MARKET FREEDOM:                           MARKET FREEDOM:
Restricted Market                               Free Market   Indonesia -- came about in 1965, when postal services
                                                              were separated from telecommunications services. Pos
                                                              Indonesia is still state-owned and is the official carrier
                                                              for Indonesia’s 230 million people.
                                                              Today, Pos Indonesia employs about 26,000 workers in
                                                              nearly 20,000 permanent post offices. Traditionally, the
                                                              company has provided letter post and financial services.
                                                              But in recent years, Pos Indonesia has expressed a
                                                              desire to participate in the development of Indonesia’s
                                                              information infrastructure.

                    MARKET COMPETITION:                       Pos Indonesia’s growth has paralleled that of the
                       Not Competitive
                                                              Indonesian economy in general. At the height of the
                                                              Asian economic crisis in the late 1990s, mail volume was
                                                              just 3.38 pieces per capita each year. By 2007, as Indonesia
                                                              and other emerging markets in Asia recovered, per-capita
                                                              mail volume reached 3.989 pieces annually -- an increase
                                                              of about 18 percent. In November 2009, Pos reported
                                                              having Rp 6.62 trillion (US$715 million) in assets.

As of 2007, Pos Indonesia operated about 20,000 permanent post offices that each served an average of about
11,600 people. Employees of Pos Indonesia unionized in 2000. Because Pos serves more than 17,000 islands
throughout the country, the company relies on both private and government train, bus, airplane, and ship
operators to aid in the transportation of mail.
Mail has been collected on average once per work day (Monday through Friday) from boxes in urban areas and
twice per week in rural areas. Deliveries were made an average of three times per working day in urban areas
and two times per week in rural areas.


STRUCTURE                (CONTINUED)
Pos Indonesia offers standard letter mail as well as some express services. The post also offers some direct mail
services, whereby it receives letters electronically and then prints and delivers physical copies.
The Indonesian government has granted fuel subsidies to Pos Indonesia in order to offset the cost of transportation.
Pos shares the revenue from terminal dues with the state treasury.
Business reforms begun in the late 1990s continue today. Priorities in Pos’s transformation include:
• Investment in training and coaching tools for employees.
• Implementation of new technology.
• Revamped service processes with an eye toward improving efficiency.
Pos Indonesia has established the electronic “Wasantara Network” to address the challenges posed by its vast coverage
area. Wasantara serves as Pos Indonesia’s “Intranet” for operational purposes and as a support for commercial activities
in the field. The network links all of Indonesia’s main post offices with the Ministry of Communications.
Indonesian consumers may also access the Wasantara Network from their own computers or from Warung Pos
Internet access points at post offices and other places throughout the country.

Although nominally an independent company since 1995, Pos Indonesia remains state-owned. Before 1995,
when it was officially a government agency, Pos enjoyed the exclusive right to collect, transmit, and deliver
all letters and post cards. That monopoly has often been ignored. Pos Indonesia consistently sought stronger
monopoly protection on letters weighing less than 500 grams, particularly during a 2006 debate over draft postal
legislation. But in September 2009, the Indonesian House of Representatives bucked that pressure and put an
end to Pos’s nominal monopoly as the country’s lone postal operator.

In the market for letter mail, more than 600 licensed independent “postal” companies also operate in big cities and
towns throughout the country. These companies offered quasi-postal services and the delivery of letters even
before the official liberalization of the Indonesian postal market in 2009.
Many cargo and freight companies also handle letters and packages. In the express mail market, the world’s
largest international shipping titans offer substantial competition to Pos Indonesia.
Given the low postal volumes following the financial crisis of the late 1990s and the demands of universal service
(20,000 retail units over two million square miles), Pos Indonesia has faced pressure to “add value to the basic postal
network,” as a recent World Bank report put it. Pos hopes to achieve such an objective by leveraging its Wasantara
Network to offer consumers hybrid mail (electronic mail printed remotely) and other Internet-based services.

48 Consumer Postal Council | Index of Postal Freedom | 2012
                                         P O S                    I N D O N E S I A

Before 1995, the Indonesian government served as both operator and regulator of the postal marketplace. A restructuring
effort was begun in that year that granted Pos Indonesia greater managerial and decision-making autonomy.
Currently, the Directorate General of Posts and Telecommunications (DG Postel) is the regulatory body
responsible for developing, implementing, and maintaining postal policy in Indonesia. In a supervisory role,
the Ministry of Communications ensures that Pos Indonesia’s policies are in line with established national
guidelines. Delivery time and transportation connectivity standards for Pos Indonesia’s mail delivery system are
set according to standards outlined by the Universal Postal Union (UPU).
With a new focus on “business culture,” Pos Indonesia has set up five service divisions -- transportation, stamp-
collecting, technology and information systems, parcels, and property -- to serve as “profit centers,” with the intention
of granting greater autonomy to regional directorates. Since the 1995 reforms, Pos Indonesia has reported steady
increases in total revenues -- even with the deduction of interest paid on assorted government loans.

Pos Indonesia’s universal service obligation includes reception, transport, and delivery of mail throughout the
Indonesian archipelago’s two million square kilometers of territory. As a result, the company enumerates seven
different categories of mail with delivery speeds that range from several hours to several days.
The 2009 law providing for liberalization of the Indonesian postal market re-affirmed Pos Indonesia’s universal
service obligation, including “cooperation with local and international postal service operators,” according to
Mohammad Nuh, Indonesia’s Communication and Information Technology Minister.
The Indonesian government must approve of all basic postal rates for letters and postcards.

Hoping to bounce back from losses of Rp 40 billion (US$4.32 million) in 2008, Pos Indonesia is set to invest
US$64 million in new infrastructure. The bulk of this investment, which represents a six-fold increase in capital
expenditures relative to their 2009 level, will be devoted to electronic applications, as opposed to paper ones.
With the new infrastructure, Pos Indonesia hopes to expand its breadth of services. The company projects a
50-percent increase in profitability in 2010 thanks to planned initiatives in microfinance, money transfer services,
electronic bill payment, and business logistics. Pos expects to profit Rp 90 billion (US$9.5 million) on revenue of
Rp 3.7 trillion (US$399.6 million).
The Indonesian government sees the expansion of Pos Indonesia’s network as crucial to building the nation’s
economy. Aided by its existing electronic capabilities -- like the Wasantara Network -- Pos Indonesia hopes to
make the transition from national post to major player in the information economy.


50 Consumer Postal Council | Index of Postal Freedom | 2012
                                                        I S R A E L                                 P O S T

                    MARKET COMPETITION:                        Israel Post -- Israel Post emerged days after Israel
                      Very Competitive
                                                               declared independence on May 14, 1948, when the
                                                               United Nations’ attempt to partition Palestine into
                                                               separate Jewish and Arab states failed. Israel Post has
                                                               roots in the British postal system from the mandate
                                                               period (1920 - 1948) and was an important unifying
                                                               symbol for the new Israeli State. Throughout its
                                                               history, Israel Post has been active in commemorating
                                                               the state’s history though its postage stamps. This has
                                                               occasionally led to political and religious controversy.
MARKET FREEDOM:                            MARKET FREEDOM:
Restricted Market                                Free Market   Because of the nation’s unique defense needs and its socialist
                                                               roots, the government has played a large role in virtually all
                                                               aspects of Israeli society. Israel Post is no exception.
                                                               Beginning in 1948, the state of Israel provided postal
                                                               services through the Ministry of Transportation. From
                                                               1951, mail delivery came under the Ministry of Posts,
                                                               which later became the Ministry of Communications.
                                                               Consistent with the British model, the service included
                                                               letters, parcels, and telegrams, as well as telephone
                                                               services. An Israeli Postal Bank was established in 1951
                    MARKET COMPETITION:
                       Not Competitive                         which processed not only private but most government
                                                               payments and money transfers.

In 1986, legislation was passed to nudge public-service units of the government in the direction of greater self-
management. This legislation created the Israel Postal Authority. This Authority was formally constituted in
April 1987 and was responsible for mail until 2002, when mounting operating losses, political scandals, and the
recognition that deeper structural changes were necessary in light of the electronic revolution in communications
led to calls for reform.

Israel Post -- 100 percent owned by the government -- ultimately comes under the control of the cabinet
posts of finance and communications. Conflicts, which are usually initiated by labor unions, have led to stormy
negotiations before the State Attorney and in civil and even rabbinical courts. Coalition blocks from the Knesset
often take sides. Over the past few years, the State Comptroller has conducted investigations into charges of
graft and corruption within the postal service.


OWNERSHIP & STRUCTURE                                (CONTINUED)
In 2007, the turnover of the combined entity, the Israel Postal Authority and the Israel Postal Company (IPC),
reached NIS 1.732 billion (US$485 million). The budget of the Israel Postal Company for 2008 was NIS 1.798
billion (US$503 million).
The Israel Postal Company employs 7,000 workers, including 1,500 postal delivery staff. It maintains 700 postal
branches, 4,602 mail collection boxes, and 1,000 vehicles and sorts 2.5 million postal items every day. That adds
up to 787 million postal items sorted per year. Israel Post also transports 1.6 million packages per year and makes
2.3 million express deliveries per year.

In July 2002, after a series of studies, the Israeli government set up the framework that would convert the Israel
Postal Authority into a new government company -- the Israel Postal Company Ltd. -- and allow for a prudent,
step-by-step liberalization of the Israeli postal market. Israel Postal Company Ltd. began operations in March
2006. Between 2002 and 2006, licenses were granted to a small number of competitive mail carriers. At first, these
competitors were limited to charging rates no less than 4.5 times the rate charged by Israel Post.
The postal market can now be considered open, but Israel Post continues to enjoy one unique monopoly right
-- foreign packages arriving in Israel from abroad, regardless of their customs status, are assessed a fee starting
at NIS 35 (US$9.80) for handling by the Post.
It is important to note that the powerful Israeli labor unions -- notably the national Histadrut Labor Federation
and Israeli postal employees union -- played large roles in negotiations over postal reform. As the government,
concerned about postal losses, sought to raise postal rates in 2006, the unions objected. Union leaders claimed that
higher rates would make the Israeli Post “uncompetitive,” as business would be taken by private firms, eventually
resulting in layoffs at the government carrier. Strikes and legal actions have followed. As these disputes have
wound their way through Israeli courts, job actions and work stoppages by postal workers have cut off deliveries
of tax payments and government benefit checks.
Potential losses at Israel Post put the company on the brink of collapse, so a Tel Aviv Labor Court ordered the
government in June 2008 to provide a “security net” of 36 million shekels (US$10 million) to the Post to make
sure the company would not dismiss workers. Moreover, pensions were guaranteed by the government, and
those employees who were laid off in cost-cutting moves were given substantial “adjustment grants” by the
government. Early retirement buyouts were also used to cut costs.

The Israel Postal Company provides universal postal service to the general population, under the motto “From
everywhere, to everyone at an equal price to all.” The Post provides approximately 100 products and services, including
many items outside the scope of traditional mail, through the largest branch network in Israel.
Rates are recommended by a Rates Committee, which meets together with representatives from the Finance
and Communications Ministries.

52 Consumer Postal Council | Index of Postal Freedom | 2012
                                                        I S R A E L                                 P O S T

REGULATION & UNIVERSAL SERVICE                                                  (CONTINUED)
Because of its large staff, high compensation rates, and contributions back to the government, Israel Post has
historically operated at a loss. In 2002, its operating deficit was NIS 150 million; in 2003, it was NIS 200 million. Israel
Post’s financial prospects may be turning around, however; it posted a small profit in 2007.

Israel Post faces competition from private carriers. The postal reforms between 2002 and 2006 opened Israeli
postal markets to entrepreneurs. Israel Post’s monopoly on bulk mail was ended in July 2007, and unions have
initiated intermittent job actions and sanctions as a result.
Private carriers generally deliver mail only on profitable urban routes.
Despite this nominal competition, Israel Post retains a stranglehold on the consumer market. After the IPC
announced the 35-shekel fee for incoming foreign packages, the Jerusalem Post editorialized that “the public
has no viable alternative to basic mail services making it vulnerable to what amounts to extortion. . . The IPC
knows that most ordinary folks remain its captive consumers[,] a fact which renders its new demands [i.e., the
35-shekel fee] particularly unacceptable.”
Government studies have recommended raising postal rates, but unions have objected. Union leadership maintains
that such increases would bring about “rigidity” in rates and make it “impossible for the Postal Company to
compete” with private entrepreneurs.
Mail delivered by the Post weighing between 100 and 500 grams now (2006) costs NIS 3.30 (roughly US$0.92),
and VAT is not charged for international mail.

With the establishment of the Israel Postal Company, the government promised lower rates for consumers and
better service. However, the country increasingly relies on electronic communications. As of 2006, close to two
million Israelis were Internet users. When the new Post structure was proposed, postal rates were to have been
reduced immediately by 6% and then by 1% over each of the following five years. The Postal Bank’s services
were also to be expanded. But the proposal, at least concerning rates, was opposed by unions and was ultimately
dismissed as premature and overly ambitious.
The Post has struggled with deficits. “We are in a deficit because it is difficult to compete and make profits for a few
years as our formerly monopolistic services have been exposed to competition. It will take a few years until we can
stabilize ourselves and make a profit so we no longer need a safety net,” a postal company spokeswoman said in 2008.
Nevertheless, the Israeli economy has rebounded since 2003, thanks to broad structural reform. The economy
grew an estimated 5.4% in 2007, the fastest pace since 2000. Foreign investment has been strong, and both
tax revenues and private consumption are up, setting the economy on a solid growth path. Israel Post saw
its prospects improve in 2007 after years of losses, posting a profit of NIS 40 million (US$11 million). The
company’s Postal Bank was the engine for much of that profit, bringing in NIS 307 million (US$86 million).
Company officials predict that profits will grow in the future.


54 Consumer Postal Council | Index of Postal Freedom | 2012
                                     P O S T E                             I T A L I A N E

                    MARKET COMPETITION:                       Government-owned Poste Italiane has evolved into a
                      Very Competitive
                                                              financially profitable and technologically sophisticated
                                                              conglomerate that offers an array of services to Italy’s
                                                              60 million consumers. According to a 2011 Fortune
                                                              report, the group’s revenues of US$28.9 billion ranked
                                                              eighth in the country -- and 329th worldwide. And in
                                                              2009, Poste Italiane was listed as one of the three most
                                                              -admired companies in Italy by Fortune.
                                                              Poste Italiane’s operating profit in 2010 was up 16.9 percent,
                                                              to €1.87 billion. From 2002 through 2010, Poste Italiane
MARKET FREEDOM:                           MARKET FREEDOM:
Restricted Market                               Free Market   reported eight consecutive years of profits. The post has no
                                                              doubt benefited from the removal of a 45-eurocent mailing
                                                              option in 2006; retail consumers must send their letters via
                                                              “posta prioritaria” at a cost of 60 eurocents.
                                                              The organization’s success has been helped significantly
                                                              by its expansion into banking, insurance, financial
                                                              services, logistics, phone cards, and other competitive
                                                              markets. This effort built upon Poste Italiane’s network
                                                              of 14,000 post offices. Traditional mail services in Italy
                    MARKET COMPETITION:
                                                              are often slow and barely profitable -- only half the
                       Not Competitive                        mail sent between Naples and Bologna, 360 miles away,
                                                              arrives within the 1-3 day delivery window classified as
                                                              “on-time.” Financial services have surfaced as a crucial
                                                              source of new revenue for the organization.
So far, Poste Italiane has weathered and actually benefited to some degree from the global financial crisis. The
postal bank invests only in state bonds, and Italian consumers view postal savings certificates and accounts as
safe havens for their cash in the wake of declining values for other types of assets.

Sixty-five percent of Poste Italiane shares are held by the Italian government’s Ministry of Economics and
Finance. The remainder is owned by a government company which manages the investment of public savings
(Cassa Depositi e Prestiti S.p.A).
Management controls a broad empire beyond mail and package delivery. This includes business logistics, banking and
internet services, insurance, credit cards, investments, hybrid electronic document processing, and even mobile phones.


OWNERSHIP & STRUCTURE                                (CONTINUED)
Here is a short summary of Poste Italiane’s many subsidiaries:
    BancoPosta accepts and invests deposits.
    PostePay facilitates bill-paying.
    The SDA Group provides express mail and logistics.
    Mototaxi runs city bike couriers.
    Postecom operates Internet services.
    PosteVita sells a range of insurance products.
    Fondi Bancoposta Sgr handles investments.
    Poste is the European leader for hybrid electronic mail and document processing.
    Poste Italiane’s Europa Gestioni Immobiliari unit engages in real-estate financing.
Poste Italiane employs roughly 41,000 postmen and about 152,000 workers in total. The workforce has shrunk
since Poste Italiane became an independent company. While government-run, the national post employed
nearly 200,000 workers.
In 2010, Poste Italiane delivered roughly 2.8 billion pieces of mail. It retains just 5 percent of the domestic
package market, according to IBM. Letter volumes are less than half of EU per-capita averages.
Poste Italiane reported its first overall profit in 2002 -- after fifty years of red ink as a government agency. It
has reported profits in each of the eight years since.
In 2010, Poste Italiane reported that its operating profit was up 16.9 percent, to €1.87 billion, from €1.599
billion in 2009. The group reported revenue from postal services of €5.05 billion and from financial services of
approximately €4.67 billion in 2010. Both represented slight decreases in revenue from the previous year.

In 1998, in response to the general EU schedule for gradual liberalization of national postal markets, Italy
converted its traditional national post into a public limited company. The new share company evolved rapidly.
In 1999, Priority Mail service was introduced, and in 2000, Poste Italiane implemented a broad plan to upgrade
post offices.
Poste Italiane no longer maintains a monopoly on letter mail below 50 grams, as the EU directed that postal
markets in member states be liberalized by 2011. The target date for full liberalization had been postponed
several times, and Italy took full advantage by refusing to liberalize its market ahead of schedule.

56 Consumer Postal Council | Index of Postal Freedom | 2012
                                     P O S T E                            I T A L I A N E

LIBERALIZATION                     (CONTINUED)
Poste Italiane has received government support during the transition to a liberalized postal marketplace. In
2006, for example, the Italian government removed the standard 45-cent letter from Poste’s product offerings.
Since then, every letter sent via Poste must be sent as “posta prioritaria” at a cost of 60 eurocents.

In July 2011, Poste Italiane established free wi-fi internet access in 22 of its main branches. CEO Massimo
Sarmi considered it essential for his customers.

Prior to liberalization of the entire postal marketplace, licenses were granted to 1,600 mail operators for a market that
included some 900 million pieces of mail outside the monopoly. Given Poste Italiane’s historical unreliability, many
consumers embraced the entrance of independent operators into the delivery market in the 1990s. Nevertheless,
the postal market is relatively non-transparent, and the legacy of the monopoly on letter mail -- the weight for
which declined over time -- has assured Poste Italiane a dominant position, even after liberalization.
The market for packages is more competitive. According to IBM, Poste Italiane has just 5 percent of the
domestic package market.
Major players in the postal market include Dutch titan TNT Post, which employs 1,437 workers in Italy.
According to BT Global Services, TNT Express Italy is the market leader for domestic and international
parcel and package shipments in Italy.
Deutsche Post’s various brands also maintain a presence in the Italian market.
There are five significant players in the mail market, of which Poste is by far the biggest. Poste Italiane has
revenues more than three times higher than its nearest competitor.

Poste Italiane has been aggressive in diversifying its business into markets more lucrative than traditional mail,
even as it’s maintained its core mail obligations. It has invested substantially in electronic infrastructure for
banking, financial services and advanced business logistics have. These efforts were undertaken in partnership
with outside firms, including such technology leaders as Microsoft and Cisco. wNon-mail financial services
compete directly with the private sector.

More than half of Poste Italiane’s revenues come from financial services and insurance. Traditional mail accounts
for less than a third of total revenues. It’s clear that Poste Italiane’s management is “betting on banking,” as
IBM’s postal analysts put it in 2006.


NON-POSTAL SERVICES                             (CONTINUED)
The global financial crisis did augur some good news for Poste Italiane. Money poured into Poste Italiane’s
banking unit, which Italian savers regard as a safe alternative to the country’s endangered commercial banks. In
October 2008, purchases of postal savings certificates were almost 300 percent higher than in September, while
Italian mutual funds suffered massive withdrawals. Deposits to postal savings accounts jumped 112 percent in
October 2008 compared to the previous month.

In December 2010, Poste Italiane agreed to buy MedioCredito Centrale for €136 million as part of a plan to
create a new bank to develop Italy’s poor southern region. Poste Italiane will act as manager for the bank which
plans to stimulate the impoverished region through lending to small and mid-size businesses.

Today, Poste Italiane manages €340 billion of savings in more than 5 million accounts. With such assets, Poste
Italiane is one of the largest savings banks in Italy.

Its investment arm, Fondi Bancoposta Sgr, handles €3.1 billion.

A further €29 billion of savings and deposits is managed through Poste Vita, the national post’s insurance
company. Poste Vita is the largest life insurance company in Italy. In 2010, Poste Vita achieved 34 percent growth
with earned premiums of €9.5 billion. In fact, in two years Poste Vita has grown by 70 percent.

In 2003, Poste Italiane introduced PostePay, which is now the most widely used prepaid credit card in Europe.

Poste Italiane has recently moved into wireless telephony with its “virtual” telephone company Poste Mobile. As
of December 2008, 630,000 customers had bought Poste Mobile SIM cards for their phones. Poste Mobile also
has tapped into the market for payment systems by phone.

In a partnership with Italy’s National Railway System in 2008, Poste Italiane set up Italia Logistica, a nationwide
business logistics operation.

Notably, in the course of these modernization and expansion initiatives, Poste Italiane units have not been spun off.

From 2002 through 2010 , Poste Italiane reported eight consecutive years of profits.

Poste’s management has bet heavily on financial services as the engine of growth for the organization. Some
commentators question whether it will be able to maintain its dense network of post offices into the future,
particularly as consumers move online to conduct their financial operations.Poste Italiane continues to venture into
new fields where it essentially competes with private-sector providers. Its mail operations have benefited from the
profits borne by non-mail operations.

58 Consumer Postal Council | Index of Postal Freedom | 2012
                                    P O S T E                            I T A L I A N E

Such cross-subsidies have helped modernize and maintain the mail sector. For example, all Italian postmen are now
provided with mobile devices to track mail status and deliveries.

In 2008, Standard & Poor’s listed Poste Italiane as one of the top candidates for “final” liberalization. Indeed, there
were reports in June 2008 that the Italian government was considering a further privatization of certain state-
owned companies, including Poste Italiane. But the credit collapse put such plans in doubt.

In June 2011, credit rating agency Moody’s discussed the possibility of downgrading the credit of up to
16 banks and other related issuers, including Poste Italiane. Premier Silvio Berlusconi, however, remains
optimistic about their credit.

In Italy’s “mixed” economy, the government has traditionally played a large role. Given the current economic
environment, the “safety” of Poste Italiane’s financial conglomerate grants the state postal monopoly great advantage
over private-sector firms engaged in everything from financial services to communications to package delivery.


60 Consumer Postal Council | Index of Postal Freedom | 2012
                                                              J A P A N                        P O S T

                    MARKET COMPETITION:                       Japan Post is comprised of four major entities: postal
                      Very Competitive
                                                              operator Japan Post Service, post office operator Japan
                                                              Post Network, life insurer Japan Post Insurance,
                                                              and financial institution Japan Post Bank. This
                                                              unique structure was created in a landmark, 10-year
                                                              privatization scheme on October 1, 2007.

                                                              That privatization plan, however, was halted in early
                                                              2010 by the new government of the Democratic
                                                              Party of Japan (DPJ), which was elected in
MARKET FREEDOM:                           MARKET FREEDOM:     September 2009.
Restricted Market                               Free Market
                                                              A reorganization of the four-pronged structure for
                                                              Japan Post has been the focus of reform plans in recent
                                                              years and is expected to get back on track during 2012.

                                                              Japan Post’s infrastructure sustained major damage
                                                              in the catastrophic earthquake and tsunami of March
Japan                                                         2011, with as many as 330 post offices destroyed or
                                                              damaged. In light of a 5.5 percent mail volume loss
                                                              in the 6 months from April-September 2011, Japan
                                                              Post Service Co. announced losses of ¥44.3 billion, an
                    MARKET COMPETITION:
                       Not Competitive                        improvement in the bottom line of one-third over the
                                                              same period a year earlier.

The four present JP entities are all multimillion- or multibillion-dollar entities. Japan Post Insurance employs
5,770 workers and is the nation’s primary provider of life insurance policies. During the 2008 fiscal year
(which ended March 31, 2009), JP Insurance reported premium income of ¥7.9 trillion (US$83.69 billion).

Japan Post Bank -- with 233 branches, 11,675 employees, and agents in approximately 24,000 post offices
-- holds deposits totaling over ¥177.5 trillion (US$1.88 trillion) and total assets of ¥196.5 trillion (US$2.08
trillion). The Bank’s net income was ¥229.3 billion (US$2.43 billion) in the 2008 fiscal year. With such
financial heft, Japan Post Bank is the biggest bank in the world.


STRUCTURE                 (CONTINUED)
Japan Post Service’s 95,631 employees distribute 68 million pieces of mail per day to 32 million locations. JP
Service delivered 21.2 billion pieces of mail in the 2008 fiscal year and earned a net profit of ¥29.8 billion. Rates
for regular letters up to 25 grams are ¥80 (US$0.85); for letters up to 50 grams, the rate is ¥90 (US$0.95).

In fiscal 2008, Japan Post Network earned ¥40.8 billion (US$432.2 million) through its network of 24,539
post offices. It employs 112,726 people. Japan receives the second-highest volume of mail in the world, trailing
just the United States.

All told, the net income for the entire Japan Post Group was ¥422.8 billion (US$4.48 billion) in fiscal 2008.

Ordinary Japanese households, who tend to shun “riskier” financial markets, have long kept their savings in
low-interest accounts with Japan Post Bank. Having halted privatization, the DPJ is poised to double the level
of deposits that JP Bank can legally take, to ¥20 million (US$211,880) per customer. The existing government
guarantee on deposits would stay at ¥10 million (US$106,030). This change would give the postal bank a huge
advantage over other Japanese banks.

The DPJ government is also contemplating a change that would allow Japan Post Insurance to raise its
coverage limit to ¥25 million (US$264,850). Japan Post Insurance already controls 40 percent of the market.

In principle, Japan’s postal market has been liberalized since January 2003. As many as 100 firms have applied
for licenses to deliver mail up to 250 grams. But none of these firms has a significant presence in the postal
marketplace. Japan Post effectively has a monopoly.

The highly publicized privatization scheme had been full of stops and starts even before the DPJ government
officially put it on hold. In reality, Japan Post would hardly have been private, as the state would have retained full
ownership of the holding company.

Historically, Japanese economic planners have identified postal reform as key to making Japan’s financial markets
more efficient. The country has struggled through four recessions since 1991, and policymakers have admitted
that interlocked and inefficient capital allocation was inhibiting growth. Japan Post simply controlled too many
assets. As of 2005, more than 85 percent of Japanese households had postal service accounts and some 60
percent had insurance policies with Japan Post.

Former Prime Minister Junichiro Koizumi staked his political legacy on the privatization of Japan Post by calling
snap elections in 2005. Despite passionate opposition, Koizumi won enough support to move ahead with his long-
term plan to privatize the behemoth.

62 Consumer Postal Council | Index of Postal Freedom | 2012
                                                           J A P A N                            P O S T

LIBERALIZATION & PRIVATIZATION                                         (CONTINUED)
In January 2006, the government mandated the establishment of a holding corporation -- Japan Postal Services
Corporation (JPSC) -- whose stock was to be entirely owned by the government. JPSC in turn was structured to
own the stock of four subsidiary operating corporations created as Japan Post was split up. JPSC began to identify
itself as Japan Post Holdings Co., Ltd. The four-part structure formally came into being on October 1, 2007.
These reforms tore deep into the fabric of Japanese society. Political and cultural opposition was strong, and
powerful interest groups continuously made their voices heard.
Japan’s postal labor unions proved especially hostile to the privatization plan. In fact, two of the postal unions,
previously rivals, merged in response to the announced plan in October 2007 to form the Japan Post Group
Union. This syndicate has 229,000 members.
By September 2009, when Koizumi’s Liberal Democratic Party was voted out of office and replaced with the
Democratic Party of Japan, the privatization plan began to unravel.
On March 30, 2010, the DPJ government adopted Banking and Postal Service Minister Shizuka Kamei’s
“renationalization” policy, and the privatization plan was effectively scrapped.
Plans to reorganize Japan Post into three entities had been considered for late 2011 but were delayed until 2012
for reasons including the effects of the March 2011 earthquake and tsunami. A holding company that merges the
explicitly postal entities (Japan Post Network and Japan Post Service) would stand at the top of the organizational
chart. Japan Post Bank and Japan Post Insurance would operate under the wing of this new holding company. The
government plans to take the new company public at some point but will keep more than one-third of the shares.
Previous efforts to privatize even parts of Japan Post have met resistance. A plan to sell an unprofitable string of
hotels owned by the JP holding company was scuttled in February 2009, after the Minister of Internal Affairs
and Communications called into question the deal’s transparency and sale price.

A 2004 Cabinet decision left Japan’s politically appointed Minister of Internal Affairs and Communications (MIC) with
virtually complete authority in mail matters -- approving all changes in postage rates and supervising postal operations
and standards. The Cabinet ruling also continued universal postal service, and stated that the postal monopoly would
not be abolished “for the time being.” In effect, the government continued to set the prices and make the rules.
With privatization now a non-starter, regulatory reform is also unlikely. Japan Post and its emerging subsidiaries
will continue to report to and be supervised by the Japanese government.
The arms of Japan Post are government-owned corporations. They report directly to the government and retain
government guarantees and special rights.


Universal service is recognized in Japan to comprise 6-day delivery of mail of up to 4 kilograms. The DPJ
also plans to charge the re-organized postal group with providing “universal” banking and insurance services
throughout the country. An independent postal reform committee would be created to monitor for unfair
competition with private-sector financial institutions.

Japan Post is in the process of modernizing its traditional mail operations. It has taken steps to form business
alliances with both Japanese and European firms to gain a foothold in the high-margin package delivery market.
Almost immediately after initial restructuring in October 2007, Japan Post forged a domestic partnership with
Nippon Express, a prominent Japanese parcel delivery firm.

As a result of the DPJ’s reforms, Japan Post is poised to compete more aggressively with private insurers and
banks. Private firms are not pleased with the government’s decision to raise the ceiling on JP’s bank deposits and
insurance policies. They fear that competition will suffer. Other critics of the new reform plan worry that it will
throw the nation’s financial markets “back to the past.”

JP’s business focus remains on the domestic market. Insurance and banking services are sold through the
Post’s network of post offices, and the company has not announced any plans to expand abroad. About
80 percent of Japan Post’s assets are invested in Japanese government securities, so foreign dealings
appear unlikely.

Japan Post Insurance Company was the world’s largest insurer by asset value in 2009, with assets of over $1
trillion. A 2010 report by the U.S. Trade Representative noted that its life insurance system “remains a dominant
force in Japan’s insurance markets.” The report expressed concern about conditions obstructing a level playing
field between the company and private-sector insurers and has urged Japan’s government to take steps to ensure
equivalent treatment.

Japan Post has introduced electronic bill-paying and also begun to offer its customers the option of moving
savings into a range of investments -- including stock market investment trusts managed by private financial
firms. Japan Post has also formed an advertising company to take advantage of unused space inside and outside
of post offices. As of 2008, Japan Post Bank offered JP-brand credit cards. Similarly, Japan Post Insurance has
begun offering hospitalization and surgery insurance.

64 Consumer Postal Council | Index of Postal Freedom | 2012
                                                       J A P A N                          P O S T

Liberalization of postal markets in Japan really got underway with changes made in 2003, but in recent years,
the most significant initiatives to complete the task have met formidable resistance and subsequent delays.
Most recently, 2012 has been designated as the target date for reorganizing Japan Post and transferring
ownership to the private sector.

The Japan Post Group’s senior management has made a priority of focusing on strengthening internal management
systems as it addresses losses due to declining volume. Meanwhile, its President and CEO noted in the Group’s
2011 annual report, “Having waited for the realization of postal reforms, we would like to begin providing easy-
to-use products and services to better respond to the needs of customers.” He also noted that 2012 would be the
time for a “counteroffensive to ensure our postal business develops and grows over the medium and long terms.”
Postal market observers worldwide will certainly be keeping a close eye for signs of progress.

   K E N Y A

66 Consumer Postal Council | Index of Postal Freedom | 2012

                                                              OVERVIEW & HISTORY
                    MARKET COMPETITION:                       The state-owned Postal Corporation of Kenya (PCK
                      Very Competitive
                                                              or Posta) dominates the Kenyan postal market, though
                                                              private delivery firms maintain a significant presence.
                                                              Since 2003, the number of licensed postal and courier
                                                              operators has doubled. Like many national posts
                                                              worldwide, Posta sees expansion into financial services
                                                              as its best avenue for future growth.
                                                              The Kenyan postal service has its origins in the mail
                                                              system created by Britain, the colonial power, to serve
                                                              sub-Saharan British East Africa -- what is now Kenya,
MARKET FREEDOM:                           MARKET FREEDOM:     Uganda and Tanzania. The combined East African
Restricted Market                               Free Market
                           Kenya                              postal service for the three territories was consolidated
                                                              into a single postal union in 1933.
                                                              Kenya gained independence in 1963. Fourteen years
                                                              later, in 1977, the government controlled Kenya Post and
                                                              Telecommunications Corporation (KP&TC) emerged as
                                                              the country’s national post after the demise of the East
                                                              African Union and its regional postal service.
                                                              KP&TC’s telecom arm was separated from the
                                                              postal wing in the late 1980s, and in 1999 KP&TC
                    MARKET COMPETITION:                       was officially split into the Postal Corporation of
                       Not Competitive
                                                              Kenya, the Communication Commission of Kenya
                                                              (CCK), and Telkom Kenya, which remains the sole
                                                              provider of landline phone service.

As of June 2009, Posta operated 31 main post offices, 472 departmental postal outlets, and 204 postal agencies
(sub-post offices). The service provided letter post, parcels, expedited mail services (EMS), money orders, third-
party payments and receipts (agency services), electronic money transfer services, and lottery tickets. Posta
employed roughly 4,300 postal workers in 2009. The main labor union representing Kenyan postal workers is
the Communication Workers Union of Kenya.
According to CCK’s 2007-08 annual report, “private letter boxes continued to play an important role as the last
mile in the delivery of postal items by PCK.” As of June 2008, Posta had installed 414,616 private letterboxes.
Of those, 335,438 were rented.


STRUCTURE                 (CONTINUED)
Posta derives a significant chunk of its revenue from processing utility bill payments for public and private
suppliers, since the stream of “social letters” is weak. Posta’s CEO said that business mail -- bills, invoices, bank
statements and demand letters -- accounted for 70 percent of Posta’s 3 billion Kenyan Shillings (Ksh) (US$39
million) in revenue in 2007.
The postal service’s stated goal is to become “financially stable.” In March 2010, Posta claimed on its website that
it sought to grow financial services revenues from their current level, Ksh 700 million (US$9 million), to Ksh 5
billion (US$65 million) over a five-year period. (As of March 2010, Posta’s website did not list a beginning or end
year for this five-year period.) Planners hope that mail revenue will grow from Ksh 2.2 billion (US$26 million) to
Ksh 3.2 billion (US$42 million) and that revenue from courier services will increase nearly tenfold, from Ksh 113
million (US$1.5 million) to Ksh 1 billion (US$13 million) over the same five-year period. In total, postal leaders
hope to triple revenue, from roughly Ksh 3 billion (US$39 million) to over Ksh 9 billion (US$119 million).
Posta is pinning much of its hope for growth on so-called agency business -- processing an expanding stream of
utility bills and required mail for the retail, financial and banking sectors. Favorable deals negotiated with other
governmentcontrolled entities may foment growth in the agency business. Posta already collects commission
fees from utility companies to collect fees and bills on their behalf. These arrangements are based on complicated
fee-sharing contracts. At present, Posta is paid fees by utility companies which range from Ksh 17 (US$0.22) and
Ksh 50 (US$0.65) to collect payments.

Posta Kenya effectively maintains a monopoly on the delivery of letter mail. Kenyan law requires that private
operators handling letters of up to 350 grams charge at least five times Posta’s basic letter rates.
All firms offering postal or courier services are required to obtain licenses from the CCK. Licenses are valid
for 15 years, as long as the licensed firm pays the annual fee. Fees for private operators range from Ksh 22,500
(US$290) to Ksh 450,000 (US$5,800). PCK must pay an annual license fee of Ksh 3,750,000 (US$48,300).
The breakup of the Kenya Post and Telecommunications Corporation in 1999 was one of the first concrete steps
toward liberalizing the Kenyan communications sector. Telkom Kenya was largely sold off in 2007, but Posta is
still government-owned.
There are no plans to privatize Posta, but the service is working with outside firms to upgrade mail and courier
services and move into modern financial businesses. The postal service is also launching efforts to franchise at
least 60 post offices, particularly those that had made losses, to private firms and individuals.

Nearly 150 postal and courier firms currently operate within Kenya in accordance with the Kenya
Communications Act of 1998. As of 2008, there were 14 licensed international operators and well over
100 licensed operators within the country.

68 Consumer Postal Council | Index of Postal Freedom | 2012

Posta is regulated by the Communications Commission of Kenya (CCK). According to the Kenya Communications
Act of 1998, CCK is mandated to license and regulate postal and courier services throughout the country. CCK
grants licenses to operators, regulates the tariffs and fees for basic services, and maintains the overall order of
the postal and courier market.
Posta is the “public postal licensee” and the official universal service provider for Kenya. As such, Posta must
provide the “consistent supply of basic quality postal services [including reserved services and postal financial
services] at affordable prices at all points in the country.”
The Commission establishes and enforces minimum standards for Posta’s delivery performance. Mail delivery
expectations range from one to six days, depending on the day of posting and whether the delivery is to be made
in an urban or rural area.
Mail posted for delivery before noon within the same urban area is expected to be delivered on the same day. Mail
posted after noon for delivery within the same urban area is expected to be delivered the next day. The same is
true for letters sent from one urban area to another. Urban to rural delivery standards are established at three
days, and rural to urban standards at five. Posta is considered in compliance with its universal service obligation
if it reaches these standards at least 65 percent of the time.

Remittances from abroad are a major source of income for the Kenyan economy, but Posta’s share of the cash
transfer service market has dwindled, thanks to the likes of Western Union, MoneyGram, and mobile-phone
company Safaricom’s M-Pesa service. The market for international remittances approaches Ksh 60 billion
(US$779 million) annually.
Posta has long operated the government-owned Kenya Post Office Savings Bank, which is structurally separate
from the postal service and reports to the Ministry of Finance. About half of all Posta’s post office locations also
serve as outlets for the Savings Bank.

The CCK has warned Posta that it will be overtaken by competitors if it doesn’t modernize. Posta has already
lost market share in the courier sector to rivals which now control the Ksh 3.3 billion (US$43 million) courier
business. Not long ago, Posta effectively monopolized that business.
A 2008 report in Business Daily, a Nairobi newspaper, suggested that Posta’s regular mail delivery is slow and
erratic. The service wants to boost revenue by franchising out post offices which are losing money, building up
direct mail marketing, and undertaking a complete restructuring of its money remittance and courier businesses.
Additionally, the service has plans to introduce a postal-based savings service, postal giro services, and hybrid
mail. However, some analysts say the strategic shifts will have little impact because competitors have already
locked up the most profitable market niches.


70 Consumer Postal Council | Index of Postal Freedom | 2012
                                                          K O R E A                            P O S T

                    MARKET COMPETITION:                       Founded in 1884, Korea Post became a government-
                      Very Competitive
                                                              owned enterprise in the 1960s. It’s still owned by the
                                                              South Korean government today. Aside from mailing
                                                              services, KP outlets offer customers the opportunity to
                                                              pay bills, to use ATMs for deposits and withdrawals, to
                                                              buy stock, and to purchase phone cards (both national
                                                              and international).
                                                              Korea Post has been aggressive among national
                                                              posts in bringing financial services into both post
                                                              offices and households via the Internet through
MARKET FREEDOM:                           MARKET FREEDOM:
Restricted Market                               Free Market   agreements with banks and telecommunications
                                                              companies, including some that are government-
                                                              run. Deposits at KP tripled between 1997 and 2007,
                                                              to about US$43 billion. That was roughly 5 percent
                                                              of all Korean deposits.
                                                              In 2011, Korea Post hinted that it would explore
                                                              offering credit cards. Its financial services arm has
                                                              also forged a partnership with the Land Bank of
                                                              the Philippines to offer remittances among Filipinos
 Korea              MARKET COMPETITION:
                                                              living and working in Korea. Meanwhile, the 2011
                       Not Competitive
                                                              KORUS FTA places new limitations on Korea Post’s
                                                              insurance offerings.

KP consists of 12 entities, including a General Affairs Division, Planning Division & Management Bureau,
Bureau of Posts, Postal Savings Bureau, Postal Insurance Bureau, and Inspector General.
Korea Post processed 4.831 billion items of mail in 2009, or 99.1 pieces of mail per person. Its courier and
express business steadily grew between 2003 and 2007, even as overall mail volume fell. Mail volume decreased
by 1.1 percent in 2009.
KP has announced its intent to expand into the “logistical support” business, but specific plans to derive
profitability from this income source have not been made public. KP has branded this initiative “u-POST” and
aims to use mobile technologies, radio communications, and RFID to allow customers to track mail and packages
in real time. The manufacturing and information logistics business in Korea is very competitive.


STRUCTURE                 (CONTINUED)
Like all postal services, KP’s traditional mail stream has been shrinking. However, KP has been among the first
posts to offer IT-based hybrid mail. Hybrid mail volume nearly tripled between 2004 and 2009, to more than 100
million items. Revenue on this product quadrupled, to more than 50 billion won.
KP’s employee base has grown and stood at roughly 44,000 employees as of 2009. In 2009, the service had
roughly 3,700 post offices.
KP posted revenue in 2009 of US$6.7 billion. Net income was US$787.4 million.
Despite its status as a government-owned entity, Korea Post claims not to receive any additional assistance or
financing from the national government.

Korea Post, including its postal savings operations, is regulated by the Ministry of Knowledge Economy
(MKE), the successor agency to the Ministry of Post. Other financial institutions are regulated by the
Korean Financial Services Commission. The government’s Financial Supervisory Service (FSS) can conduct
an examination of KP’s postal savings operations at the request of the MKE. However, FSS examinations
are not mandatory for KP. Such audits are required for other financial institutions with operations in the
South Korean market.
The KORUS Free Trade Agreement between the United States and South Korea, signed in October 2011,
subjects Korea Post’s insurance products to regulation by the FSS, placing private insurers on more equal
footing with KP.
KP is the universal service provider in Korea. It defines universal service as “postal and financial services that
every citizen can access easily from anywhere.”

KP retains a monopoly on traditional letter mail. It competes with private express carriers in the express mail
and parcel services markets.
In the highly competitive express mail sector, KP holds about 25 percent market share. Korea Post’s parcel
services hold about 10 percent market share.

Privatization of Korea Post has been mentioned by Korean leaders, but there’s been virtually no action on
the issue. Labor unions resisted privatization efforts in 1994. President Lee Myung-bak announced that postal
privatization would be one of his priorities when he took office in February 2008.

72 Consumer Postal Council | Index of Postal Freedom | 2012
                                                            K O R E A                              P O S T

PRIVATIZATION                     (CONTINUED)
In a 2008 paper by its Country Analysis Unit, the Federal Reserve Bank of San Francisco reported “growing
public concern over the competence and financial expertise of KPS [Korea Post] staff managing the postal
savings deposits.” But as yet, postal reform -- particularly postal financial services reform -- has remained on
the government’s wish list of reforms. Amidst the 2008-09 economic crisis, government spokesmen candidly
admitted that postal reform had moved to the back burner.

Korea Post’s involvement in financial services dates back to the late 19th century, soon after the post was founded.
Its current structure as a financial savings institution was codified in the Postal Savings Law of 1962.
In 1977, however, Korea Post’s financial services operations were largely suspended. At that time, the Ministry
of Post transferred the postal savings program to a series of agricultural cooperatives so that it could focus on
developing telecommunications services. In 1983, KP regained its postal savings operations. But in the six-year
interim, the post lost many of its potential customers to the agricultural cooperatives.
Korea Post’s savings operation is substantial, though not nearly as large as Japan’s. Koreans maintain nearly 21
million postal savings accounts. Thirty percent of KP deposits come from rural areas.
Deposits tripled in the ten years following the 1997 Asian economic crisis, to some US$43 billion by 2007.
Postal savings accounts are seen as a safe haven with a government guarantee. These postal savings deposits have
long been a source of funds for the government.
Until 2003, KP was forced to place its deposits in the Public Capital Management Fund, where they were pooled
with other sources of public funding.
In 2009, the Industrial Bank of Korea, one of the country’s large government-owned banks, expressed its desire
to take over KP’s savings operation.
KP also offers many different forms of insurance, including traffic accident, health, and homeowner’s policies.
South Korea is the eighth-largest market for insurance services in the world, with premiums totaling $65 billion.
Under the terms of the 2011 KORUS Free Trade Agreement, Korea Post is prohibited from issuing new types
of insurance products, and limitations to modifications including coverage increases apply.
KP’s insurance business has been growing, albeit at a slower pace than in the mid-2000s. In 2009, the post held
more than 10.6 million contracts.
As Korea Post has undertaken restructuring initiatives in recent years, KP’s postal savings assets have been a major target.
Korea Post also maintains a significant presence in asset management. KP controls billions in funds that it invests
in equities and bonds worldwide.
In 2010, The Korea Herald reported that Korea Post would expand financial services to mid- and low-income customers,
as part of its efforts to support the underprivileged and maintain its status as a profit-seeking public firm.
Korea Post launched a remittance service in the Philippines in partnership with the Land Bank of the Philippines
in 2010. Filipinos living and working in Korea can send money home at KP outlets.
In 2011, Korea Post reportedly began preparing to offer credit-card services to consumers.


74 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                           S E P O M E X

                    MARKET COMPETITION:                       Servicio Postal Mexicano (Sepomex) is the national
                      Very Competitive
                                                              postal service of Mexico and officially retains a
                                                              monopoly on all mail items under one kilogram. It
                                                              delivers relatively little mail, however, and is widely
                                                              distrusted by Mexican businesses and consumers.
                                                              Indeed, Sepomex handles some 700 million pieces of
                                                              mail per year; that equates to just seven letters per
                                                              Mexican per year. The equivalent number in Brazil,
                                                              for example, is forty-six per citizen. For further
                                                              comparison, New Zealand Post delivers about one
MARKET FREEDOM:                           MARKET FREEDOM:
Restricted Market                               Free Market   billion pieces of mail per year, and the U.S. Postal
                                                              Service some 200 billion.
                                                              Sepomex has struggled since a 1982 economic collapse
                                                              and subsequent earthquakes. Even in recent years,
                                                              despite the Mexican economy’s enormous potential
                                                              and booms in some sectors, Sepomex has not been
                                                              able to regain public confidence. With a few notable
                                                              exceptions, delivery of the mail has passed to more
                                                              than 4,000 private -- and generally more expensive --
                                                              delivery and courier companies, which have sprung up
                    MARKET COMPETITION:
                       Not Competitive                        to fill the gap.

The mail is regulated under Mexico’s Transport and Communications Ministry, and postal service -- supposedly
universal service -- is reserved by the state under Mexico’s Constitution. But universal service in Mexico has
an odd ring because Sepomex delivers so little mail compared with other countries. The monopoly on letters
below one kilogram is loosely enforced.
In an effort to renew its fortunes, Sepomex has been calling for legal reform that would give it a strictly
enforced monopoly on packages weighing 350 grams or less and require private couriers to charge up to seven
times Sepomex’s prices. Sepomex also has been pushing for the Mexican legislature to create a new regulatory
organization to investigate postal violations.
To date, the government has done little to move ahead on this front. Instead, Sepomex has been forced to
increase its own prices, mainly on its remaining corporate clients.


Sepomex’s status as a government-owned entity dates back to 1580, when its colonial precursor was charged
with communicating with the rulers in Spain.
The mid-1980s were watershed years in the history of the Mexican Postal Service, as economic crisis and
natural disasters destabilized the agency. Many of its primary mail processing buildings were destroyed in the
earthquakes which hit Mexico City in 1984. These centers have only been partially rebuilt. Mail volumes since
that time have continued to trend downward, although accurate statistics are hard to come by.
In 1986, Sepomex was formally created as an autonomous agency to provide postal service. It was also allowed
to create a higher-priced courier service, Mexpost, to compete with foreign express delivery services. Little
else has been done to restructure the organization.
As of 2007, Sepomex employed but 9,619 mailmen nationwide and a total staff of 19,665 -- a decrease of
roughly 10,000 from twenty years ago. The agency has a fleet of 1,000 trucks -- 500 less than rival DHL.
Mailmen, paid around $3,500 a year, trudge around with an average of 500 letters a day. For the many below
average employees, mail routes have deteriorated to a “fistful of letters.”
In 2004, Sepomex operating losses reached the point where calls emerged for restructuring to push the entity
towards financial self-sufficiency. Technically, Sepomex is responsible for financing itself, but the government
does subsidize the agency if there’s insufficient revenue. In recent years, state subsidies have been needed to
make up for fiscal losses.
As part of its restructuring efforts, Sepomex targeted income of US$189 million in 2004. The government sought
to make additional subsidies contingent on cutting costs and increasing income to lower the annual operating deficit
to US$26.5 million -- US$3.5 million less than its typical deficit. To that end, over the last five years Sepomex has
entered into consulting, training, and systems contracts with the United States Postal Service.
In 2007, Sepomex declared total revenue of 607.9 million pesos, or about US$61.3 million.

Sepomex suffers from a serious lack of confidence among its potential customer base. In 2005, Mexican
pollster Parametria found that 29 percent of Mexicans had never even heard of Sepomex. Of those familiar
with the agency, 32 percent considered it slow. About one third preferred to use private messengers to hand
deliver documents. It’s reported that in some areas, mail boxes are widely used as garbage bins.
Each year, 80 percent of the mail sent is letters, bills, and account statements; 14 percent is advertising, and
another 4 percent is publications like magazines. Packages constitute the rest of Sepomex’s annual volume.
The agency processes some 13 million statements for Telmex, the Mexican telephone giant, every month.

76 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                      S E P O M E X

Private delivery of pieces under one kilogram is officially illegal, but exemptions are given for companies
which offer some kind of additional value, like confirmation of delivery.
Despite Sepomex’s shortcomings, mail markets are reasonably robust in Mexico. The National Mexican
Association of Courier Businesses represents some 30 private couriers who serve more than 400,000 clients,
with sales running close to US$925 million a year.
People have simply gotten used to conducting commerce absent a functioning mail service. The millions of
Mexicans working in the United States who regularly send money home won’t risk putting anything in an
envelope that will pass through the regular Mexican post office. They find other ways, like the Mexican-
created, multi-million-dollar Houston-based Estafeta USA courier service or even informal hand-to-hand
delivery over the border.

Internet communications and wireless telephony have cut deeply into paper (letter and document) mail’s
market share in Mexico. Political and economic pressure has drawn most of Mexico’s available resources into
what are seen as the communications systems of the future, consigning improvement of the postal network to
the back burner. Over 22 million Mexicans already use the Internet, according to the CIA’s World Fact Book.
In contrast to most other national postal systems, Sepomex, even with its monopolies, has not been able to find
ways to pull itself onto this bandwagon of growth. It has introduced some advanced systems with the help of
contracts with the US Postal Service and others, but these have been attempts to serve relatively small niche
markets more efficiently, not to improve mail service for all Mexicans.
Liberalization and privatization of postal markets are not on the agenda in Mexico in the same way they are
in other countries because Sepomex is so dysfunctional and because the government faces far more pressing
political issues.

T H E                       N E T H E R L A N D S

78 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                         T N T                   P O S T

                    MARKET COMPETITION:                       The Netherlands has been a leader in Europe’s drive to
                      Very Competitive
                                                              liberalize postal markets. The country’s primary mail
                                                              carrier, TNT Post, has been a private company since
                                                              1994 and has long been traded on the stock exchange.
                                                              Since April 2009, the Dutch mail market has been fully
                                                              liberalized. Moreover, the company’s corporate parent,
                                                              TNT Group, has used strategic partnerships and
                                                              acquisitions to become a major player in nearly every
                                                              European mail market that allows competition. In
                                                              fact, from its headquarters in the Netherlands, TNT is
                                                              actively positioning itself to become one of the world’s
MARKET FREEDOM:                           MARKET FREEDOM:     major mail carriers, with worldwide staffing and
Restricted Market                               Free Market
                                                              operations which far outstrip its small Dutch “base.”
                                                              Since the mail market’s liberalization in 2009, competing
                                          Netherlands         carriers have begun to deliver letters under 50 grams. TNT
                                                              authorities estimate that competitors held about 14 percent
                                                              market share in the Netherlands in 2009. In an effort to
                                                              reclaim market share, TNT has announced intentions to
                                                              carry out a complete redesign of its mail network in 2010.
                                                              The Dutch market is small and concentrated. Like
                                                              most modern mail sectors today, it is over 90 percent
                                                              dominated by business mail. However, TNT is counting
                    MARKET COMPETITION:                       on its nimbleness, advanced technology, and market
                       Not Competitive
                                                              savvy to offset the decline in traditional paper mail and
                                                              aggressively moving into the most profitable sectors in
                                                              mail markets in other parts of the world.

As a company, or more accurately, a group of companies, TNT has reinvented itself over the last decade. It has
executed several spinoffs, acquisitions, and partnerships in order to adjust not only to evolving technology like
email but also to the start-and-stop regulatory uncertainties of the European Union.

In 2009, mail accounted for 40.5 percent of TNT’s revenues and 72.8 percent of TNT’s operating income. Mail
revenues reached €4.2 billion (US$5.4 billion).
TNT’s Express arm operates in 65 countries and delivers to over 200. TNT Express delivers documents, parcels, and
other freight worldwide with a fleet of 47 airplanes and 26,000 vehicles. According to the company’s 2009 annual
report, TNT held 18 percent of the express market share in 2009 and posted €6 billion (US$7.6 billion) in revenues.
By comparison, Deutsche Post DHL reported 16 percent of the express market share, and UPS had 9 percent.
TNT employs about 160,000 people worldwide.
In recent years, TNT has exited the logistics and freight management businesses to concentrate on express mail
and other ventures where margins were higher.
T H E                       N E T H E R L A N D S

State-controlled mail in the Netherlands has a long history. Earlier for-profit mail services were consolidated into
a state monopoly in 1799, and over time all the innovations of an active business-oriented economy followed. In
addition to internal and cross-border mail, Dutch royal mail eventually supplied telegraph, banking and money
transfer services as well.
As the Netherlands grew its trade and industry, its mail service led the continent in introducing labor-saving
innovations -- postal codes, presort processing, and increasingly sophisticated mechanical mail sorting.
However, by the middle of the 1980s, the weight of maintaining post offices, structural inertia, and a large
labor force combined to cause the service to begin to lose money. Widespread use of telephones, then faxes,
international express mail, and the beginnings of email pointed to major changes within its traditional markets.
Planners for the state-owned post began to restructure the service for emerging business mail markets and
sought ways to make it profitable. The Postal Giro Service and the National Savings Bank were split off in
1983 and an independent company, Postkantoren BV, was set up to operate postal counters (savings and mail).
On January 1, 1989, the postal service itself was restructured as Royal PTT Netherlands NV, a private stock
company, yet all shares were still owned by the state.
In 1994 the company’s stock was listed on the Amsterdam stock exchange and, in the pivotal year 1996, majority
control of PTT Post passed from the Dutch government to private hands. In that same year the company
acquired TNT, a world-wide delivery service from Australia. Almost overnight the company became a major
player in global mail and logistics.
In 1998, TNT and PTT Post were joined as TNT Post Group (TPG) independent of the telecom arm of
the business. And in 2002, PTT Post became TPG Post, which has since evolved into TNT Post, the name
used today. In the Netherlands, Royal TNT Post is the country’s primary carrier, with letter-mail market
share of about 86 percent. Its parent TNT has become a conglomerate aggressively seeking business and
profits all over the world.

The Netherlands proclaims it has gone farther than virtually any other EU member in opening its domestic
mail markets. In theory, European markets were to be opened by 2008, but exceptions have been made in
some countries.
TNT Post’s two biggest competitors are Sandd and Selekt Mail. Both are active in the business-to-business and
business-to-consumer marketplaces. Sandd has a significant presence in the direct mail and magazine subscription
markets. Selekt Mail is a subsidiary of Deutsche Post. All the major players in the European postal market also
offer express services in the Netherlands.
In the residential market, there is little competition to TNT Post. But the combined business and residential
markets in the Netherlands are not sufficient to satisfy the company’s aggressive business model. The company
has been in the forefront of efforts to liberalize mail markets in Europe and worldwide, and has acquired express
delivery companies in China, India, Brazil and Spain to tap into growth markets.

80 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                         T N T                   P O S T

The universal service obligation covers letters weighing up to 2 kilograms, domestic parcels weighing up to
10 kilograms, and international parcels weighing up to 20 kilograms. The universal service provider -- TNT
-- must deliver every day but Sundays and holidays and must deliver no less than 95 percent of letters by the
day after the day of posting.
In a country as small and compact as the Netherlands, universal service has never been a problem. In fact, TNT
management has been much more concerned with the use of universal service as a barrier to other countries’
liberalizing their markets and using direct and indirect subsidies to prop up incumbents.

The Dutch Postal Act of 2009 governs the Dutch postal market and TNT Post. OPTA, the independent
Supervisory Authority for Post and Telecommunications, supervises the postal market as well as TNT’s
compliance with its universal service obligations. OPT also has rate-setting authority. The Minister of
Economic Affairs maintains authority over postal policy.

TNT has set the explicit goal of becoming the second postal service provider after the national incumbent in every
county of Europe. It aggressively supplies a full line of mail services with emphasis on business, and is technologically
advanced, flexible and nimble. With its own small “base” well covered, the company has used strikes by postal workers
in the United Kingdom and elsewhere to grab market share. It has become the ultimate conglomerate, seeking profitable
niches wherever regulations, monopoly inertia or high margins offer opportunities. Some insiders say TNT is all the more
aggressive because its Dutch base is shrinking and increased competition is driving down margins in business mail.
In line with increases in fuel and transport costs, mail prices have generally been rising in most EU countries in recent
years. But many national monopolies are still in place, and it is expected that prices for business-generated mail will
fall after full market opening. As technology continues to revolutionize the communications mix, TNT has moved to
provide the most advanced consumer services. It aggressively combines traditional mail with electronic media, and
has added sophisticated tracking and tracing capabilities designed to exploit the wave of internet shopping delivery.
TNT has stated publicly that it would like liberalization to move faster. It also contends that too few countries
have opened their markets.
The company is very concerned with “leveling the playing field” in what it calls “responsible liberalization.”
Moreover, the recent extension of mail openings to 2011 for 11 of the EU’s 27 member states is blocking what
TNT sees as necessary expansion channels.
In December 2009, TNT announced the “Vision 2015” -- a five-year plan to help the company optimize its
national and global performance with an eye on improving profits. Thus far, things look promising. A 2010 TNT
outlook report boasts that the first few months of 2010 have shown a “continuation of the improving trend in
express volumes started in the third quarter of 2009, albeit against a weak prior year comparison.”
In accordance with Vision 2015, TNT has expanded its vehicle fleet in the Middle East, reduced transit times
between Europe and Tangiers, expanded its international freight service in Russia, and improved intercontinental
offerings through a strengthened partnership with Con-Way Freight.

N E W                          Z E A L A N D

82 Consumer Postal Council | Index of Postal Freedom | 2012
                    N E W                     Z E A L A N D                                      P O S T

                    MARKET COMPETITION:                         New Zealand Post was corporatized and restructured
                      Very Competitive
                                                                very rapidly as part of top-to-bottom reorganization of
                                                                New Zealand’s economy beginning in the mid- 1980s.
                                                                The traditional, protectionist and inward-turning
                                                                model of what had long been a British Crown colony
                                                                was rebuilt by Labor Party Finance Minister Roger
                                                                Douglas to integrate New Zealand into the realities of
                                                                a radically changing global economy. Douglas followed
                                                                the theories of the American economist Milton
                                                                Friedman and the Chicago School.
MARKET FREEDOM:                            MARKET FREEDOM:      “Rogernomics,” as the measures were called,
Restricted Market                                 Free Market
                                                                consisted of reforms pushed through Parliament
                                          New Zealand
                                                                which turned New Zealand towards a free-market,
                                                                competitive model that welcomed foreign products
                                                                and investment. The country’s sleepy, colonial,
                                                                agricultural orientation disappeared virtually
                                                                overnight. Foreign exchange controls and industry
                                                                subsidies were eliminated. Marginal tax rates were
                                                                cut and financial markets deregulated. This “new
                                                                order” continues to the present with many positive
                                                                results, in spite of lingering controversy. The whole
                    MARKET COMPETITION:                         experiment is an unusual example of radical, free
                       Not Competitive
                                                                market innovations undertaken by an otherwise left-
                                                                leaning Labor government.

A significant reform of New Zealand Post, one of New Zealand’s largest employers, was part this movement. Until
roughly 1985, NZP was a government bureaucracy consisting of mail, savings bank, and telecommunications
divisions. These three units were split apart, distanced from direct government control, and restructured as
government-owned enterprises, or SOEs. They were not, however, privatized.
The government Ministries of Communications and State-Owned Enterprises continue to hold all shares, and
there is no intention, it appears, to sell these shares to private investors. But the Post now competes as if it were
a private enterprise. NZP pays taxes, earns a return for its ministerial shareholders, and reports periodically
according to the Postal Acts and other relevant legislation.
Large sectors of New Zealand’s mail were opened to competition early on, and NZP’s final monopoly on standard
letters was stripped away as of April, 1998. Even though NZP remains ultimately under government control, it
has expanded aggressively in the private sector through a portfolio of joint ventures and acquisitions. Despite
early liberalization, NZP still controls about 95% of the country’s letter market.

N E W                          Z E A L A N D

New Zealand is a small, remote country consisting of 4 million people living primarily in cities along the coasts of
two main islands in the far South Pacific some 1,200 miles southeast of Australia. Settled primarily by the British
who for years warred against indigenous Maori, New Zealand eventually became a Crown colony (1902) which
retained close ties to Britain and remains, formally at least, under “the Crown,” though in practice independent.

Early postal services were set up in the mid-19th century on British and Australian models. New Zealand
settlements were isolated and accessible only by sea. Early post offices were agents of the Wellington government
-- registering births and deaths, handling money transfers, voting processes, even marriages. That tradition --
the postal offices representing the government and providing government services -- remains alive today.

Of course, in recent times intercity transportation and communication problems have been solved with railways,
superhighways, regular air service, and now electronic channels. Sea and air transport are now reliable and
regular -- and virtually instantaneous cable and satellite transmissions are now standard.

New Zealanders lived well for decades exporting dairy and agriculture products to England via Australia. The
economy faltered when Britain finally entered the European Economic Community in 1973. New Zealand felt --
and was -- economically abandoned, and the economy entered a period of stagnation. By the 1980s, policy makers
realized New Zealand had to change to survive amidst changed realities.

NZP was losing money, and its services were ponderous and slow to adapt. The Postmaster General, under
government prodding, ordered a study in 1985 which recommended sweeping changes in the way the Post was
organized and administered. The report made the case for splitting up the Post’s three core businesses -- mail,
bank, and telecom -- and restructuring them as independent state-owned corporations.

According to the State-Owned Enterprises Act of 1986 and the subsequent Postal Services Act in 1987
(supplemented by a Postal Services Amendment Act in 1990) these recommendations were carried out. Some
432 post offices were closed in 1987, replaced by alternative postal outlets. The postal service returned a
NZ$70 million profit in 1988. The price of a standard stamp dropped from NZ $0.45 to $0.40 in 1995. During
this time, New Zealand Post increased its percentage of next-day deliveries from 17 percent to, eventually,
above 99 percent and was able to cut postage rates.

NZP did retain, for more than a decade, a statutory monopoly on the delivery of standard letters. In 1987 this
reserved area included letters delivered for under NZ$1.75 or weighing less than 500 grams. In 1991 the reserve
area was reduced stepwise to letters under 200 grams carried for less than NZ$0.80. By 1998 the Government
of New Zealand removed the final Postal Service monopoly on letters weighing less than 200 grams.

84 Consumer Postal Council | Index of Postal Freedom | 2012
                 N E W                    Z E A L A N D                                    P O S T

New Zealand Post delivers to 1.8 million delivery points, including over 200,000 rural delivery boxholders.
Rural boxholders used to be assessed a substantial rural delivery fee, but that fee was eliminated in 1995.

In 1998 an additional Postal Services Act completed the deregulation of the New Zealand postal market which
now may be considered open to full competition. New Zealand Post is contracted as the universal service carrier.

Although traditional first-class mail volumes are sinking, over the last 20 years NZP has entered joint ventures
and acquired companies across the spectrum of mail, express delivery, bulk business mailing and logistics. NZP
also set up a very profitable banking business, Kiwibank, in 2002. Through that bank, the Post has ventured
into credit cards, retail store gift cards, personal loans, insurance, foreign exchange, online billpay, business
lending and further into the home mortgage market through its 51% stake in New Zealand Home Loans.

According to the State-Owned Enterprises Act of 1986, the New Zealand Post Office was ‘corporatized’
and its core businesses split into three separate companies as of April 1, 1987. Telecom, Post Bank and New
Zealand Post companies -- still owned by the Government -- were expected to operate as commercial entities
and be profitable, efficient, good employers, and maintain a high level of social responsibility.

Ten non-executive and independent Directors make up the Board of Governance of the New Zealand Post
Group. These governors must report any potential conflicts of interest, and every effort is made to ensure fair
and businesslike oversight. Directors in turn serve on task-specific committees for the group using corporate
models of governance.

The Act defined the specifics of the Government’s (Crown’s) ownership of the company, setting out rules
governing Directors as well as the responsibilities of the Ministers who retain ownership of shares. The
Act also laid out reporting requirements. The Act attempts to distance management from political influence.
The Government may instruct the new SOEs to undertake additional tasks only under the condition that the
government funds such tasks.

Besides the several Postal Services Acts, the New Zealand Post is also subject to provisions of the Commerce
Act of 1986, The Fair Trading Act of 1986, and the Companies Act of 1993. The State-Owned-Enterprises
Act also introduced a so-called Statement of Corporate Intent for the New Zealand Post. That statement,
which must be updated annually, sets out performance targets and accounting rules. Additionally, performance
updates must be presented in half-year and annual reports to the independent Directors, shareholding Ministers
and Parliament. A further Deed of Understanding was set up between the Government and the New Zealand
Post which outlines service, price and social undertakings of the corporation.

N E W                          Z E A L A N D

Unlike most countries, New Zealand has no provinces or states beyond a system of local governments, regional
councils, and territorial environmental and transport authorities. The New Zealand Post reports to its Directors
and its shareholding ministers in the capital of Wellington, but is also responsible, in a larger social sense, to a
network of local planning bodies. New Zealand Post’s relationship with its government “owners” and the public
is maintained through the Deed of Understanding specifically relating to the postal service, and the various
postal and government Acts which apply.

Maintenance of existing levels of universal service by New Zealand Post was stipulated in the postal Acts.
According to law, NZP may not cross-subsidize its commercial ventures with mail revenues.

Under New Zealand’s current regulations, it is relatively simple to become a “postal operator” able to process
and deliver mail, at any cost. A simple form is required to register on the Postal Register with the Ministry of
Economic Development. Today there are some 25 such operators, including New Zealand Post, and a handful of
these have set up relatively broad delivery networks. However, despite the loss of its monopoly in 1998, NZP still
controls approximately 95% of the letter market today.

By the end of 1998, when mail competition was fully opened, there were 17 registered operators in New
Zealand. Most were small and localized. But larger competitors began to emerge, including Fastway Post
(a subsidiary of Fastway Couriers) which set up a franchised nationwide network of retail outlets, and
New Zealand Document Exchange Limited (DX Mail) began providing regular business-focused deliveries
in major cities. These companies and others negotiate access arrangements with New Zealand Post. In the
very competitive express delivery market, New Zealand Post entered into a joint venture (Express Couriers
Limited) with DHL in 2005. NZP is also very active in data management and direct mail processing
(Datamail Group), competing against numerous other suppliers. The company has also become one of the
largest postal consultancy companies in the world.

NZP constructed a new network of Mail Service Centers, PostShops and mail processing operations to service its
largely urban retail and business customers. In addition, the company subcontracts a share of its rural delivery
to individuals or rural delivery teams, which service approximately 600 rural routes. These are open to tender
and small operators often combine routes.

Besides its joint venture with DHL, NZP is active in ventures which extend beyond mail. In both retail and
business banking, NZP Group’s Kiwibank has grown rapidly since its founding in 2002, and has become the
source of much of NZP’s post-reform revenue, in the face of slowly shrinking mail volumes.

86 Consumer Postal Council | Index of Postal Freedom | 2012
                N E W                    Z E A L A N D                                   P O S T

NZP delivers to over 1.84 million delivery points, including over 200,000 rural addresses. The Post maintains a
network of at least 880 postal outlets and post centers (excluding stamp retailers).

Total mail volume sank 2.1% in the 2006-07 reporting year and the price of a standard post stamp increased
to NZ$0.50. But New Zealand Post profits remain respectable, and direct mail volumes are increasing. NZP
works closely with roughly 1,300 corporate mailers who, combined, generate some 500 million pieces of mail,
approximately one half of NZP’s total mail volume of one billion pieces per year.

Overall, the New Zealand Post Group reported operating revenues of NZ$1.2 billion in 2006-07. Its net
surplus was NZ$70.2 million, of which NZ$30.8 million was returned to the government. Net profit after tax
was 12.4%. NZP paid NZ$29.3 million in taxes in 2006/2007 and raised NZ$100 million in five year bonds in
the country’s capital markets.

NZP continues to supply some non-mail services such as voter registration on contract from the Ministry of
Justice. Such services must be paid for by the government units which contract them.

   R U S S I A

88 Consumer Postal Council | Index of Postal Freedom | 2012
                                           P O C H T A                                  R O S S I I

                    MARKET COMPETITION:                        Russian Post (Pochta Rossii or PR) is a sleeping giant,
                      Very Competitive
                                                               which has only recently begun to stir with the emergence
                                                               of a new consumer economy in Russia. PR is in many
                                                               ways a relic of the vast, inefficient state bureaucracies
                                                               of the Soviet area. However, with vigorous new
                                                               management, infusions of investment capital, and
                                                               the rapid introduction of electronic communications,
                                                               the system is showing signs of new life. There are no
                                                               indications that PR will be privatized; it is, and for the
                                                               foreseeable future will remain, a state-owned enterprise.
MARKET FREEDOM:                            MARKET FREEDOM:     The service is recognized as a valuable tool in holding
Restricted Market                                Free Market
                                                               the huge Russian construct together. As the economy
                                                               evolves, international carriers are playing a role in
                                                               modernizing postal service in Russia, especially in
                                                               package transport and logistics. These two arenas are
                                                               crucial because of the unique transportation challenges
                                                               posed by Russia’s vast land mass and geography.
                                                               Fueled by a commodities boom, the Russian economy
                                                               has markedly turned around since its late-1990s
                                                               collapse in the wake of mismanaged attempts at
                                                               reform. Many Russians are now able to afford a
                    MARKET COMPETITION:
                       Not Competitive                         widening range of consumer goods. In fact, catalog
                                                               marketing is beginning to provide new growth
                                                               opportunities for postal services.

Pochta Rossii provides a perfect case study of the complex bureaucratic relationships that define post-Soviet
Russia. After the disintegration of the USSR, PR found itself divided into 92 independent regional units. The
system was enormously inefficient. Delivery times were slow, and package service was unreliable. Diverse
customs rules and inspections -- not to mention creative “interventions” in the mail stream and localized fees
and taxes -- made the system ponderous and reform difficult.
In 1993, postal service in Russia undertook the first steps of reorganization. The old post office was
formally restructured as an “FSUE,” or Federal State Unitary Enterprise. Officials attempted to reintegrate
the capital assets of the post office under a single structure belonging to the national government. The
post office, still divided by region, state, and often type of activity, was then allowed to “use” these unified
assets to deliver the mail.


STRUCTURE & REGULATION                                   (CONTINUED)
Russian Post maintains 42,000 post offices and employs 415,000 people. Postal jobs are secure but low-paying;
until recently, PR employees were paid roughly 60 percent of the average wage in Russia. PR reports handling
over 1.4 billion letters, 38 million parcels and more than 188 million money transfers in 2006. PR expects those
numbers to increase in the future and claims that it collects, sorts, and delivers 1.5 billion letters, 48 million
parcels, and more than 190 million money orders annually.
The system reportedly lost US$186 million in 2007. It provides about 80 types of services through 90 affiliates.
Although the unified operating company now has a relative degree of freedom, ultimate control still rests with
Russia’s Ministry of Communications and Information Technology.
There has been some talk of making PR a state corporation, but critics within Russia point to the conflict of
interest between seeking profits and providing social services.

During Russia’s economic decline of the late 1990s, mail usage plummeted and the postal system lost money,
even with the aid of questionable accounting practices. Attempts to reform the system included unraveling
existing arrangements and improving service without unduly upsetting patronage arrangements.
The current version of Russian Post was established on September 5, 2002. In 2007, Andrei Kazmin, the dynamic
CEO who had success reforming Sberbank, Russia’s largest state-owned bank, was brought in to supervise
reforms of Pochta Rossii. Sberbank’s structure and problems paralleled those facing the postal service. In the last
year, he has moved quickly to assess PR’s overall situation and address processing bottlenecks and management
issues. Many of the problems facing PR stem from a need to restore public confidence in the system.
The government is making both internal funding and foreign loans available to build new infrastructure, particularly
for PR. According to the Finmarket information agency, Russian Post planned to invest 9.5 billion rubles in 2007
in modernization, compared to just 600 million rubles in 2004. Kazmin has publicly stated that he does not intend
for PR to become a bank, but the organization is nonetheless rolling out an increasing array of financial services.
New processing facilities are being built in the “hub” cities of Moscow and St. Petersburg in concert with foreign
firms like TNT. PR is also attempting to centralize purchasing to cut costs.

Given Russia’s size and relative technological sophistication, initiatives for money and document transmission
via e-mail are being given high priority by Kazmin and his team. A funds transfer service called Cybermoney was
established in 2003. A service called CyberPocht@ (or Kiberpocht), which allows Russians to access computer
terminals to send and receive e-mail and funds, has recently been rolled out. By the end of 2006, Russia was
reported to have over 20,000 postal offices (PAO outlets) offering Internet access.
A whole range of value-added services centering on the post office network are in varying stages of implementation.

90 Consumer Postal Council | Index of Postal Freedom | 2012
                                            P O C H T A                                     R O S S I I

MODERNIZATION                         (CONTINUED)
Besides regular mail deliveries, post office “outlets” are beginning to offer services like the distribution of subscription
periodicals; mail order and COD; ecommerce; collection of rent, utility and tax payments; consumer cards and
credit; lottery sales; insurance products; sales of railroad and airline tickets; passes for public transportation; and
even terminals for MasterCard and Visa. PR is also pushing communication initiatives involving remote printing.
Kazmin has made raising both postal salaries and service standards a priority for his tenure. Labor costs account
for 78% of total expenses, and recent salary increases of roughly 30% have dampened expectations of PR
producing a profit in the near future, despite jumps in revenue.

The market for Russian postal services is growing rapidly and was valued at about $1 billion in 2003, with Pochta Rossii
accounting for 80 percent of that number. Today, delivering letters makes up only 20 percent of the post office’s income.
Technically speaking, the Russian postal market was opened to competition in 1996 when the Ministry of
Communications removed the state monopoly on postal services.
The Russian government is now a major source of business for Russian Post. Certain large streams of mail from other
government agencies, like the delivery of 60 million pension checks annually, are routed through Russian Post.
Most of its revenue, however, comes from delivering goods. There are some local delivery services in Moscow and St. Petersburg.
Competition with international carriers for lucrative and strategically important package delivery and logistics
services is concentrated in the western hub regions of Russia. This is a booming market, and DHL Worldwide,
TNT, FedEx, UPS and others are all involved.
In 2004, Russian Post launched its own national express mail operator (EMS -- Russian Post) with prices that
are 20% lower than competitors on average. EMS relies on its connections with the regular postal network and
touts deliveries made “door-to-door.” More than 42,000 post offices throughout Russia make EMS deliveries, and
5,500 post offices in Russia accept EMS items.
It is unclear whether Russian Post subsidizes EMS with proceeds from traditional mail. Even though the Russian
government eliminated the state postal monopoly in 1996, PR still controls 80 percent of the postal market and so
has sufficient market dominance to build EMS on the backs of ordinary stampbuying consumers.
EMS claims annual revenues in the area of $300 million and an annual growth rate of 30-40 percent.
Firms like Western Union compete in the money transfer business against PR’s Cybermoney system. PR rates are
set to undercut the competition by as much as 35 percent.

In 2002, Minister of Communications and Information Technology Leonid Reiman told Prime-TASS in an
interview that “There are no plans for privatizing Russia’s postal service in the near future,” although he added
that there remained a possibility that it might be reformed into a 100-percent government owned company.
Current law does not allow for the privatization of postal service companies. In 2006 Reiman told a Cabinet session
that of the many countries that tried to privatize their postal services, few succeeded. “For example, the U.S. Postal
Service is a government corporation and is subsidized from the budget to perform socially important functions.”


92 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                             C O R R E O S

                    MARKET COMPETITION:                       The genesis of mail service in Spain is the royal
                      Very Competitive
                                                              messenger system first created in the Middle Ages
                                                              by the Spanish Catholic monarchs. An early “public”
                                                              postal system was built up under a royal monopoly by
                                                              a privileged aristocratic family who sold its creation
                                                              in 1720 to the Bourbon King Phillip V. He placed the
                                                              mail under direct royal control and made postal service
                                                              officially available to all.
                                                              The modern postal operator in Spain -- Correos y
MARKET FREEDOM:                           MARKET FREEDOM:
                                                              Telegrafos S.A. (known as Correos) -- formally came
Restricted Market                               Free Market   into being in 1992, when it ceased to be a government
                                                              department and was christened an independent
                                                              commercial organization.
                                                              As in many other European countries, the Spanish
                                                              postal market was fully liberalized on January 1, 2011.
                                                              Mail volumes have been declining. Volume was down
                                                              9.6 percent in 2009 over the previous year. Revenue
                                                              declined 4.8 percent in the same period.

                    MARKET COMPETITION:
                       Not Competitive

                                                              STRUCTURE & STATISTICS
                                                              Correos has roughly 66,000 employees who serve
                                                              a Spanish population of approximately 46 million.
                                                              According to its annual report, the company posted
                                                              revenues of more than 2 billion euros in 2009 and
                                                              handled 4.6 billion pieces of mail.

Correos operates nearly 10,000 postal centers, including more than 2,300 multiservice offices and more than
7,400 service points which provide postal and delivery services to the country’s rural regions. The company also
offers online fax, telegram, and digital delivery services. Its website, which it calls a “virtual office,” is used by
750,000 individuals every month.
In 2007, the company invested nearly a quarter-billion euros in service, processing, and infrastructure improvements.


STRUCTURE & STATISTICS                             (CONTINUED)
Besides its core conventional mail unit, the Correos group consists of three main subsidiaries. Chronoexprés
S.A. provides express delivery for some 1.2 million packages per year. Nexea -- previously known as Correos
Hibrid -- offers mass-media communication services and hybrid mail. Correos Telecom S.A. specializes in
telecommunications services, including internet access and e-commerce.
Unionization of Correos began in 1978, almost as soon as unions became legal after the end of the Franco regime.
Public-sector unionization has been stronger and more pervasive than in the private sector; the “liberalization”
of the postal market has not affected this trend. Workers within Correos are represented by about a half dozen
unions, which do not always present a united front in negotiations.
Correos remains subsidized in part through investment requirements laid out in previous negotiations with unions
which allowed expanded private competition. To advance the cause of liberalization, the Spanish government has
been forced to make stronger guarantees of job security and subsidize both the provision of universal service
and the acquisition of assets which Correos deems necessary to providing the universal service. The accounting
for such subsidies is somewhat opaque.

Spain was among the first countries in Europe to allow private competition in its postal markets. This
happened as early as 1960. But even though small, private services were allowed to operate, Correos
remained the dominant carrier.
In the early days of its existence, Correos served as a savings bank for Spaniards. It’s estimated that at the
outbreak of the Spanish Civil War in 1936, some 40 percent of Spain’s savings were held in post office accounts.
After General Francisco Franco’s death in 1975, change came rapidly to the postal sector, thanks in large part to
a wave of liberalization in other parts of the economy, which required more reliable and efficient mail. In 1981,
Correos launched a domestic express mail delivery service, Correos Exprés. In 1983, an international express
mail service, Postal Exprés Internacional, came into being. In 2001, Postal Exprés Internacional merged with
France’s La Poste express service in Spain, creating ChronoExprés. In order for Spain to meet the standards of
the Maastricht Treaty, which created the European Community, the whole Correos y Telegrafos organization
was subject to a multiphase restructuring in 1992, with the goal of moving it out of direct government control.
In 1997, Correos became an autonomous government company. In 1998, Spain’s Ministry of Development
crafted and secured passage of Law 24/1998 to set Correos on the course to become a limited liability
company in 2001. The law spelled out Spain’s version of the 1997 EU Directive on postal services, which
addressed regulations associated with the Universal Service requirement in European nations as well as
other postal liberalization topics.

94 Consumer Postal Council | Index of Postal Freedom | 2012
                                        P O C H T A                                 R O S S I I

LIBERALIZATION & PRIVATIZATION                                          (CONTINUED)
Law 24/1998 initially allowed Correos to retain monopoly rights for long-distance domestic and international
services for letters and postcards weighing less than 100 grams until January 1, 2006. After that date, the monopoly
would only apply to letters and postcards below 50 grams. With its liberalization program, Spain intended to jump
ahead of what was required by the EU Postal Directive. Spain liberalized its market in January of 2011.
In order to prepare for these ambitious liberalization plans, the Spanish government made massive investments
to upgrade Correos’s services and infrastructure to bring it up to world standards in mail and communications
processing. Correos is now one of the world leaders in the use of advanced RFID systems. Correos Telecom
provides telecommunications services, including internet access and e-commerce services.
Correos also introduced a spectrum of new services designed to support Internet communications and
e-commerce. In 2006 the company opened a network of 30,000 Telecentros Internet access terminals for rural
markets. At the same time a new unit, Correos Hibrid, was set up to provide mass-media communication services
and hybrid mail. Correos Hibrid now goes by the trade name Nexea.
In 2006, a law requiring Correos to offer private operators access to its service network was passed.
As of January 2011, the mail market is open to competition.
Although Correos has not been privatized, it faces competition from private mail companies both within
metropolitan areas and in the cross-border market. Commercial direct mail is now open and although inter-city
and cross-border are officially not yet liberalized, it has been reported that, for all practical purposes, outgoing
cross-border mail is already open.
Postal unions continue to argue that both local and urgent mail are essential and profitable services for Correos.
Union leaders claim that the monopoly is necessary to guarantee the economic solvency of the public operator
and a sufficient standard of service. Postal unions also claim that the liberalization process has led to price
increases for postal and courier services and a decrease in the stability of employment.
In order to compete in the newly liberalized market, Correos has published a new business plan for 2011-2014.
The new plan claims to shift emphasis from the product to the consumer. In doing so, Correos hopes to gain a
greater market share in traditional post, parcels, direct marketing, and technological services.

Competition within Spain’s postal markets has been less than robust. Government estimates of market share
from 2007 using 2004 data give Correos 94.1 percent share, Unipost 3.8 percent, and other carriers 2.1 percent.
The same government report attributes 91.3 percent of Correos’s revenue to postal services.

COMPETITION & UNIVERSAL SERVICE                                          (CONTINUED)
Market surveys put the number of active mail services at about 150. Unipost, which is partially owned by
Deutsche Post, is the biggest of Correos’s competitors. It posted revenues of 89 million euros in 2006 on mail
volume of 513 million pieces. Altogether, private operators handle more than 700 million items each year,
according to 2005 data.
A few international companies (DHL, La Poste, MRV, UPS) have succeeded in gaining the largest share of
the courier-services market. Correos and the Spanish firm SEUR also offer courier services. Smaller domestic
couriers try to compete with these larger international firms, but their deliveries are for the most part
geographically limited.
Growth of the courier sector has outpaced growth in conventional mail. Between 1996 and 2003, the courier
market grew 12.2 percent on average, while the conventional postal market grew at a little over 9 percent annually.
Although Spain long resisted the move to liberalization and maintained that EU directives on funding were
insufficient to cover the cost of the service, the market was liberalized in January 2011.
The universal service obligation covers money orders; standard national and international letters up to 2
kilograms and packages up to 10 kilograms; national and international deliveries of advertising material, books,
catalogues, and periodicals; and services accompanied by a certificate and of stated value. Correos maintains
monopoly delivery rights over money orders; letters, advertising, and periodicals in the protected weight class;
and deliveries to Public Administrative Bodies. Competitors may deliver letters in the protected weight class if
they charge 2.5 times more than Correos does for the same service.
Correos delivers letters and parcels six days per week, but it must deliver letters five days a week to be in
compliance with the universal service obligation.

Under the postal law (Ley Postal 1998) passed in 1998, Spain’s Ministry of Development is charged with
making sure that postal services are universal, have suitable quality, cover the whole national territory, and
are provided at affordable prices. The Subdirectorate General for Regulation of Postal Services is responsible
for enforcing the postal laws.

Correos offers a full range of mail services for both individuals and business through its core unit
and subsidiaries.

96 Consumer Postal Council | Index of Postal Freedom | 2012
PRODUCTS & PRICING                          (CONTINUED)
Correos launched a venture with Deutsche Bank in 2006 to offer banking services. Branded as BanCorreos, the
venture suggests that Correos may be moving more fully into financial services. BanCorreos offers financial
services, loans, and mortgages. Its total business volume increased 1.1 percent in 2009. Despite Spain’s real-
estate crisis, BanCorreos maintained a zero percent delinquency rate on the mortgages it issued.
Prices vary by weight (standard mail up to 2 kilograms) and zone -- mainland Spain, the islands, and trans-
border. A standard stamp costs 35 euro cents -- 10 cents less than the average stamp price in the EU.


98 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                                    P O S T E N

                    MARKET COMPETITION:                       The Swedish postal system operates is one of the
                      Very Competitive
                                                              most liberalized mail markets in the world. Sweden’s
                                                              national post -- or “Posten,” as it is known in Sweden
                                              Sweden          -- lost its monopoly privileges on letter mail in 1993,
                                                              well before all of its European counterparts, with
                                                              the exception of Finland. Before then, the Swedes
                                                              already allowed competition in parcels and bulk mail.
                                                              However, as of 2007, Posten has retained roughly
                                                              91% of the light letter market.
                                                              Compared to other EU countries, Sweden is in the
MARKET FREEDOM:                           MARKET FREEDOM:     middle of the pack when it comes to stamp prices
Restricted Market                               Free Market
                                                              for basic domestic letters. Sweden’s prices are just
                                                              slightly higher then average, according to the Free
                                                              and Fair Post Initiative.
                                                              Swedish Posten is one of the oldest postal services in
                                                              the world, founded officially in 1636 but with origins
                                                              that extend still further back. The service has one of the
                                                              most venerable brand identities in any national culture.
                                                              Posten is also known for its efficiency. It’s important
                                                              to note, however, that the Swedish population is
                    MARKET COMPETITION:
                                                              highly concentrated around just a few major cities.
                       Not Competitive
                                                              The EU minimum standard calls for 85 percent of
                                                              domestic letter mail to be delivered overnight. Posten
                                                              far exceeds that standard, with about 95 percent of its
                                                              mail arriving the next day.

Posten was officially “privatized” in 1994, but the privatization was more formal than real. The new entity -- a
limited liability company titled Posten AB -- remains entirely owned by the Swedish government and there are,
as yet, no immediate plans to sell the company off to private investors.
Until this privatization, Posten functioned as an organ of the state -- the Postal Administration. The restructured
Posten AB, in turn, owns a group of subsidiaries providing different postal and other related services. In distinction
to most other countries, the national postal service in Sweden earlier had only a very limited legal monopoly on
the mail -- basically just for letters. Parcels and bulk mail were officially open to competition. However, Posten
had an effective monopoly, enjoying government status and paying no taxes.


In 1993, legislation was passed that, in measured steps, began transforming Posten into a “private” corporation
and eliminating the sole postal monopoly in light letters.

Home and business post office boxes were opened to competition completely, and initiatives were begun to make
core elements of postal infrastructure accessible to every new, duly licensed postal operator that sought to
deliver the mail.

Postal codes and change of address processes were opened up to competitors and, within political and practical
limitations, made available at cost.

Prior to liberalization, Posten was “profitable.” At the time, critics claimed that upstarts would cherry pick
Posten’s most lucrative markets, leaving Posten to provide “universal delivery” to the less profitable areas. This
concern proved to be unfounded, as Posten has remained profitable without explicit state subsidies and has
retained 91% of the delivery market, despite 33 licensed competitors. Posten’s network of post offices and
logistical operations, built over decades, continues to give it a formidable competitive advantage.

Sweden is slightly larger than the state of California and is sparsely populated. Some 75% of residents -- about 9
million -- live in or around just a few cities. That makes for a relatively compact postal delivery problem. A small
minority of residents, scattered across the largely inaccessible North, are the only major obstacle in fulfilling the
Universal Service Obligation.

In Sweden, the USO requirement applies only to addressed letter mail. According to the EC models, providing
universal service is ultimately the responsibility of the government itself. In Sweden, the government
has contracted with Posten AB to fulfill this obligation. Posten AB’s 1998 agreement with the Swedish
government makes it the sole provider of USO service. The government’s National Post and Telecom
Agency (PTS) regulates the entire postal marketplace, including monitoring and supervising Posten AB’s
fulfillment of Sweden’s USO.

Posten AB is not subsidized for maintaining the USO. Government investigating bodies decided that the
advantages Posten AB derives from being the sole (required) universal service provider are sufficient to fund
USO. Only a few tiny state subsidies are given for providing timely mail service to the visually impaired, elderly
and disabled in very rural areas.

Universal mail delivery is thought to provide significant commercial advantage vis-à-vis any potential competitors,
especially since Posten’s excellent speed of service does not give alternative mail companies much of an opening
to skim off a separate “overnight” market. Moreover, any shipper wishing to use a nonuniversal competitor may
be faced with expensive splitting of its mail processing operation.

100 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                               P O S T E N

UNIVERSAL SERVICE                       (CONTINUED)
Sweden’s Universal Service Obligation can be roughly divided into three components:

   1) Delivery “from all to all” Monday through Friday.

   2) Single letters must be conveyed at uniform and reasonable rates. Price increases are officially capped at CPI
      (although prices have exceeded CPI due to tax increases and “rebalancing” of mail costs).

   3) As the official provider of the USO, Posten AB is required to maintain a network of physical postal
      counters. Many of the services provided by these counters are financial and not related to mail delivery.

In 1990, Posten AB maintained 1,934 traditional post offices. Beginning in 2001, Posten began closing many of
these traditional post offices, replacing them with a new network of privatized and contracted counter services.
The new network consists of three main levels. The lowest are roughly 2,000 stamp agents who are mostly
proprietors of small shops, stands and kiosks authorized to offer the most basic stamp and mail services.
The second level of contracted service consists of about 1,600 postal outlets located within larger grocery
stores and the like. They are staffed by regular store clerks, are typically open late, and offer more services
-- including mail registration and package pickup (in Sweden parcels are not delivered to the door).
The top level are 381 Business Centers located in commercial areas. These centers are staffed and managed
directly by Posten AB. They provide complete post office services, including the processing of business mail
and insurance for parcels. Business Centers can be used by individuals and businesses alike and are open
weekdays between 7 a.m. and 7 p.m.
Additionally, rural areas are served by 2,500 rural postmen who bring their “post offices on wheels” directly
to the doors of more isolated users.
Other “traditional” mail services were also formally spun off from Posten AB in 2001. The main unit was
Svensk Kassaservice (Swedish Cashier Service) which provides a retail cashier service allowing Swedes to
pay bills and withdraw and deposit money with several Swedish banks.

As of 2007, there were 33 licensed postal operators in Sweden, but almost all were tiny, local operations in
niche markets. Only one could remotely be considered a competitor to Posten. That company -- CityMail --
specializes in low-end business bulk mail.


Launched in Stockholm in 1991, CityMail delivers only to about 40% of households in Sweden using a three-
day-a-week cycle. Until 2004, it operated at a loss. CityMail delivered 275 million addressed items in 2006 --
compared to Posten’s 3.263 billion items. CityMail has an 8.6% share of single letter volume and a 13% share of
bulk mail. Its 1,400 employees get wages and benefits equal to Posten’s.
CityMail is poised to expand. In September 2007, the company announced that it would employ 500 new staff
as part of a US$14.67 million expansion in central Sweden. By 2010, the company expects to be capable of
delivering to 60% of Swedish addresses.
Posten and CityMail run a combined subsidiary to handle postal zone directories and change-of-address
processing, but CityMail has no part of Posten’s network of postal outlets. The services of express and courier
companies are not regarded as postal operators and thus are not subject to licensing.
European postal commissions estimated that national incumbents would be likely to retain roughly 80% of mail
share after privatization. In Sweden, Posten AB has been able to maintain a dominant position in all segments of the
market. Some 14 years after the opening of the letter market, for instance, Posten AB retains 91%.

Sweden’s National Post and Telecom Agency (PTS) is the independent government agency tasked with supervising
and licensing letter mail providers. It also ensures that requirements of Sweden’s Universal Service Obligation
are met. Parcel and bulk mail delivery does not fall under PTS control.
Sweden has an independent Competition Authority, and there have been numerous cases brought before the
Authority -- most concerning CityMail’s attempts to limit Posten’s “customer loyalty programs.” These were
discounts offered by Posten to big and well-established companies to keep their business with Posten.
Posten does not work within a confrontational union environment, and its healthcare costs are taken up
by nationalized government health programs. Regulation, competition and wage disputes are not a major
political issue in Sweden.

Posten’s USO tariffs for letter mail are required to be “uniform and reasonable.” But letter mail is a small part of
the mail stream. Other parts of the mail are not as closely regulated, but competition and pricing rules attempt
to follow very general EU directives.
Price increases for letter mail are in theory tied to the CPI but in fact have risen about 90% since
liberalization. Some of these “unusual but allowed” increases are attributed to the imposition of VAT and
some to a structural redistribution of costs by Posten.

102 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                                P O S T E N

On the bulk side, Posten attempts to match many of CityMail’s volume discounts, but more often the
competition is not price but process-driven. Posten uses its own in-house sorting technology, while
CityMail encourages customers who, for internal reasons, prefer to control their own mail streams and get
customized delivery solutions from CityMail.

Competition combined with technology has brought bulk mail prices down 50% in real terms. Large mailers have
benefited. Smaller businesses have seen less improvement. Despite the price cap, such businesses have endured
gradual increases of over 50% in rates. Moreover, letter postage has increased dramatically even as the percentage
of letters in the mail stream continues to decline. Also, parcel rates have soared by 253%.
Fourteen years after complete liberalization, it does not appear that generalized rules allowing free competition --
without true privatization -- are sufficient to bring competitors into the mail market, at least under the somewhat
unique conditions that exist in Sweden.


104 Consumer Postal Council | Index of Postal Freedom | 2012
                                                             S W I S S                         P O S T

                     MARKET COMPETITION:                     Swiss Post traces its lineage to 1849, when “Federal
                       Very Competitive
                                                             Mail” -- the modern-day post’s precursor -- launched.
                                                             Today, Swiss Post delivers mail and provides both
                                                             financial services and passenger transport to
                                                             Switzerland’s nearly eight million inhabitants.

                                                             The Universal Postal Union (UPU) was founded
                                                             in Switzerland in 1874, so actors in the Swiss
MARKET FREEDOM:                            MARKET FREEDOM:   postal marketplace have long been aware of postal
 Restricted Market                            Free Market
                                                             developments around the world. The UPU established
                                                             the first Universal Postal Convention which sought
                                                             to “simplify and coordinate the inter-state mailing
                                                             of letters and parcels and regulates international
                                                             cooperation between the postal authorities of the
                                                             member states.” The UPU, now a part of the UN, still
                                                             maintains its headquarters in Berne.

                                                             Internally, the evolution of the Swiss postal system
                                                             follows European patterns. In the 1920s, the country’s
                                                             postal, telegraph, and telephone services were
                     MARKET COMPETITION:
                        Not Competitive                      consolidated into a single federally-operated unit -- the
                                                             Swiss PTT -- which continued until it was restructured
                                                             first in 1960 and again in 1970.

    On January 1, 1998 -- the yellow-branded PTT was transformed into two public service companies -- Swiss Post
    and Swisscom. Swiss Post remained entirely government-owned. Swisscom was created as a new “semi-liberated”
    stock company in which the Swiss government continued to hold 52 percent of shares.
    The intention was to give Swisscom the freedom to maneuver and compete in newly liberalized telecommunications
    markets throughout Europe and the world.
    Despite the success of private Swiss multinationals, postal ventures beyond Swiss borders by both Swisscom and
    Swiss Post remain controversial. Observers remember the 2001 bankruptcy of national airline Swissair, which
    collapsed after risky leveraged acquisitions and mergers with other airlines. The so-called “Swissair disaster”
    even resulted in a 2007 criminal trial for the policy makers and directors involved and galvanized opposition
    against “adventures” abroad, at least by quasi-government entities.


STRUCTURE                 (CONTINUED)
Like other posts worldwide, Swiss Post faces existential challenges in the near term. Not only must the
organization deal with electronic diversion -- it also operates in a small domestic market that is smaller than
those of its potential European competitors. With margins shrinking and costs rising, Swiss Post projects that
its core business -- traditional mail -- will decline by one-third by 2015.
Swiss Post has introduced several new products in hopes of generating the revenue it’s losing from electronic
diversion. Perhaps the most innovative of these is the hybrid mail product Swiss Post Box, which allows customers
to receive by email scanned images of their paper mail. They can then decide whether to have Swiss Post open
a letter, scan the contents, and email them; to have the letter destroyed; or to have it physically sent to another
address. Many postal industry observers believe this hybrid approach represents an important model for the future
of mail around the world.
Swiss Post Box is just one of the organization’s “ePost Solutions,” which also include secure identification on
the Internet, legally compliant electronic signatures, and verified electronic mail. Swiss Post’s identify verification
system “Post SuisseID” is delivered through USB sticks, which the post brands as “SwissStick,” or chip cards.
The post also offers money transfers and bill payment, ATMs, automated postal services, e-tracking, and even
passenger transport through its PostBus service.
Swiss Post is organized as a Group with units, support units, and legally autonomous subsidiaries. Primary Group units are
PostMail, Post Offices & Sales , PostFinance, Swiss Post International, PostLogistics, PostBus and Swiss Post Solutions.
Operationally, Swiss Post Group defines its markets as:
1) Communications, which includes letters, newspapers, promotional mailings, information solutions, and data
   management in Switzerland, neighboring countries, and internationally.
2) Retail finance, including payments, investments, retirement planning and some financing.
3) Logistics, covering parcels, express services, and logistics solutions.
4) Public passenger transport, including regional, municipal, and urban transport plus systems management.

Swiss Post retains a monopoly on the delivery of letters weighing less than 50 grams. In 2006, the reserve area
was lowered from 350 grams to 100 grams. The current monopoly came into force in 2009.
In December 2010, the Swiss parliament voted to begin reforming the country’s postal system. Switzerland’s
Federal Council will evaluate the consequences of fully liberalizing the postal marketplace and will offer
recommendations to parliament by 2014.
In 2004, the parcel market in Switzerland was deregulated and made open to competition. Markets for parcels,
express delivery, in-night express delivery, unaddressed mail, and newspaper deliver are all well developed.
There are no initiatives pending to further privatize either Swiss Post or Swisscom.

106 Consumer Postal Council | Index of Postal Freedom | 2012
                                                          S W I S S                          P O S T

At least 27 companies have government approval to compete with Swiss Post in the liberalized portions of
the postal marketplace.
Swiss Post claims to generate 80 percent of its revenue in competitive markets. The remaining 20 percent
comes from the monopoly area, which Swiss Post asserts is in competition with electronic media. However,
Swiss Post’s share of outbound mail has been dropping due to vigorous competition from companies like
Deutsche Post and G3 Worldwide.
According to its 2010 annual report, Swiss Post holds 45 percent market share in the import and export of
courier, express, and parcel services. Its logistics arm maintains 75 percent market share for parcels. Its lending
business posts an 11.35-percent market share. And its regional transport segment has 16 percent of the market.
Swiss Post has strong unions and a long tradition of union activism. Unions are regarded as “stakeholders” have
a strong influence in all decisions relating to the mails.

Swiss Post is Switzerland’s universal service provider. Mail service must be provided on all working days -- a
minimum of five days per week. “A POST” franked letters are delivered on Saturdays, whereas “B POST” mail
is not. Despite the deregulation of the parcel market in 2004, Swiss Post continues to be the dominant
provider in that market.
The Swiss USO is stricter than in most other European countries and includes a variety of provisions which
require extensive reporting, insure timely delivery, protect jobs, and prohibit outsourcing.

Despite a less-than-robust economic environment, Swiss Post Group generated a profit of CHF 910 million in
2010 -- CHF 182 million higher than the previous year. However, 61 percent of those profits came from SP’s
retail banking operation, not from mail.
Besides increased retail banking deposits, operating efficiencies and a higher volume of parcels contributed to
the year’s profits. Swiss Post increased employment in its letter business by 326 full-time equivalents in 2010
to bring the total employment in mail operations to 45,129 full-time equivalents. Swiss Post is the country’s
second-largest employer.
Besides the lagging economy and the inexorable decline in letter volume, there were other pressures on Swiss
Post’s profitability. In July 2009, the price of postage was reduced by the government. In 2010, Swiss Post earnings
became subject to the value-added tax. That same year, Deutsche Post decided to use DHL, its own subsidiary,
to transport parcels into Switzerland instead to subcontracting the business to Swiss Post. However, Swiss Post
profits were sufficient for it to fund its own pensions with a CHF 100 million set-aside and to contribute CHF
200 million to the federal treasury.


OPERATING STATISTICS                           (CONTINUED)
Letter volume declined 1.5 percent in 2010; Swiss Post delivered 2.365 billion address letters in 2010, down from
2.401 billion the year prior.
Parcel count went from 104 million in 2009 to 108 million in 2010. PostMail operating income sank to CHF 2.619
billion in 2010 from CHF 2.808 billion in 2009. Also, the organization’s Post Offices & Sales unit (including sales
of non-postal brand merchandise) booked a roughly CHF 100 million loss for the year. Switzerland has a dense
network of over 2,500 post office branches, which have high costs.
Retail finance offset the negatives. PostFinance had a net inflow of new money of CHF 10.662 billion in 2010,
down from CHF 20.120 billion in 2009. For the first half of 2011, deposits were up 9.9 percent.

The Swiss Postal Law of 1998 provides the legal framework for Swiss Post, including the process for liberalizing
segments of the postal market, the rules for universal service and its financial support, and the scope of
commercial activities Swiss Post is permitted to undertake.
The law was completely revised in 2004 for implementation in 2006. It placed major limitations on Swiss Post
in terms of financing and personnel decisions. Express mail and international parcels were excluded from the
post’s monopoly. Moreover, the law stipulated that Swiss Post was to finance its universal service obligations
from revenues derived from its monopoly activities. The law limited the reserve monopoly to just the size needed
to guarantee universal service. A corporate-style governing board was set up by the law with the intent of
encouraging a more “commercially oriented” organization.
Swiss Post operates under significant capital restraints. It must go to the Swiss government, not private capital
markets for investment capital. Pension funding is the subject of yearly negotiations between the post and the
government. The obligation is burdensome because postal salaries in Switzerland are unusually generous --
approximately 30 percent above market. Moreover, Swiss Post is required to provide regular reports, certified by
an independent auditor, of its computations of the cost of provided universal service.
The law divides the Swiss postal market into two segments: universal services and competitive services. In the
competitive area, licenses are required if private service operators provide regular, commercial delivery service
of mail and parcels and reach revenue liable to value-added tax of at least CHF 100,000.
The Postal Services Regulation Authority (PostReg) is a specialist independent authority attached to the Federal
Department of the Environment, Transport, Energy and Communications. PostReg monitors the Swiss postal
market to ensure that universal service is efficiently provided. PostReg deals with complaints made by the public
related to universal services and is tasked with ensuring fair competition in the segments of the postal market
that are open to it. The regulator also monitors compliance with standard-sector working conditions and enforces
a ban on cross subsidies.
PostReg is entitled to collect licensing fees up to 3 percent of a licensee’s turnover to compensate Swiss Post for
its provision of universal service, if necessary.

108 Consumer Postal Council | Index of Postal Freedom | 2012
                                                           S W I S S                           P O S T

Swiss Post provides letter service with remarkable efficiency. Analysts of postal pricing say that Swiss Post’s
domestic postage is relatively inexpensive. The post tabs itself as the sixth-cheapest provider of service among
15 “important” European countries. Swiss Post spokesmen say that if quality of service, higher Swiss salaries,
and the strength of the Swiss franc were taken into account, the organization’s ranking would be even better.

Foreign revenue from Swiss Post’s letter and package deliveries accounts for a fifth of revenue, CHF 1.8 billion.
Swiss Post, like other postal services worldwide, is seeking to expand its operations outside of its base to
compensate for declining domestic revenues. The company, according to its annual report, is already active in
twenty countries, and the proportion of its employees dedicated to these activities is rising.
Within the limits of guidelines allowed by the Swiss government, the post will no doubt continue to expand the
reach of Swiss Post Solutions, the division which handles mail and document outsourcing for companies. Policy
makers are also planning to expand PostFinance, SP’s banking arm, into corporate loans and even mortgages.
Claude Béglé, the former head of Swiss Post, sees the country as a presumptive multinational conglomerate. “The
Swiss Post must be like Nestlé,” he recently said. “It will in the future have a large headquarters in Switzerland,
will develop products here, will pay taxes on its profits but to a large extent will do business outside the country.”


110 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                                                       P T T

                     MARKET COMPETITION:
                       Very Competitive
                                                             Turkey’s postal service -- the PTT -- was first
                                                             established in 1840 as the Ministry of Post by the
                                                             Ottoman Empire. PTT stands for “Post, Telegraph,
                                                             and Telephone” -- the three roles it assumed in 1909.
                                                             In 1939, the PTT was made a Directorate under
                                                             the control of the Ministry of Transport. In 1984,
                                                             PTT was reorganized as a so-called State Economic
                                                             Establishment, and in 1995, the organization was
                                                             restructured again into the General Directorate of Posts
MARKET FREEDOM:                            MARKET FREEDOM:
 Restricted Market                            Free Market    and Turkish Telecommunications Coop as a result of
                                                             the deregulation of telecom service in Turkey. In 2000,
                                                             the General Directorate of Posts was changed into the
                                                             General Directorate of Posts and Telegraph.
                                                             As a State Economic Enterprise, PTT is entirely
                                                             government-owned, has its own Board of Directors,
                                                             and is accountable to Turkey’s Department of
                                                             Transportation under a basic Postal Law promulgated
                                                             in 1950 and revised and reissued in 2000.

  Turkey                                                     PTT maintains over 4,000 postal outlets within Turkey
                                                             including 1,056 centers, 2,226 branches, and 830 agencies.
                     MARKET COMPETITION:
                        Not Competitive                      PTT employed roughly 28,000 individuals as of 2010.

   Although universal service is not regulated by current law, PTT is simply “recognized” as the universal
   service provider throughout Turkey. As of 2005, a national regulatory authority did not exist. PTT worked as
   both the regulatory and operational body under the control of the Ministry of Transport as defined by Law
   5584. Sealed letters, unsealed letters, and postcards are subject to the reserved postal monopoly regardless of
   weight limits as of December 2005.
   PTT’s reserve area (monopoly) includes ordinary and registered letters, postcards, greeting cards, printer papers
   and newspapers, small packages, free-of-charge mailings, literature for the blind, notification papers, and insured
   letters. Following a Supreme Court ruling, credit card and bank statements also fall within the reserve area.
   Private firms involved in package delivery are regulated under a separate law No. 4925, but reports indicate
   that such firms also operate de facto in the area reserved for PTT.
   The USO delivery standard is set at a minimum of five days per week.


As of December 2005, there were 23 private firms (17 national and 6 international) in Turkey providing cargo
and courier services transporting parcels, cases, and packages weighing less than 100 kg. Supervision of private
firms is carried out by the Ministry of Transport, regional governments, and the police in accordance with the
articles of the by-law on Road Transport.
Planners are aware that PTT holds a dominant market position. Although apparently not embodied in actual law as of
2005, private deliveries outside of PTT’s reserve area are to be open and provided “without any discrimination.” The
process for so-called “access conditions” (licensing of private carriers) had not been provided for in legislation as of 2005.

According to a country report prepared by the Universal Postal Union in December 2005, there is not sufficient
independent regulatory authority to ensure fairness in postal markets in Turkey.
In the context of “harmonizing” Turkey with EU standards, the country enacted a major liberalization
and competition law in 1994, which led to the appointment of a Competition Board. In that same year, the
telecommunications industry was largely deregulated.
Although studies have been conducted, no independent postal regulatory body had been established as of late 2005.
As a result, PTT itself is tasked with setting and maintaining standards of delivery for domestic mail. International
mail is subject to periodic audits conducted in collaboration with the Universal Postal Union and PostEurop.
The Board of PTT is authorized to set postal tariffs. Domestically, there is no requirement that prices be
calculated on the basis of costs. However, international mail tariffs must in part be geared toward the cost of
providing service. PTT uses single-price delivery throughout Turkey.
Planners are aware of the potential for cross-subsidization of products outside the reserved area by those over
which PTT has a monopoly. Turkish officials admit that, as of 2005, price-setting for universal service is not yet
tied to actual costs. Further, since there is no separate accounting system for reserved and non-reserved services,
it is as yet impossible to determine whether there is in fact cross-subsidization by PTT.
Postal workers are exempt from fares, duties, and taxes charged by public institutions and municipalities.
The current regulatory state of affairs may perhaps be summed up by a 2008 report on the liberalization of
Turkish markets by the European Commission:
        No progress can be reported in the field of postal services. The legal monopoly regardless of weight limits is still
        intact. No independent regulatory authority exists in the sense of the acquis communautaire [an EU term for the
        consensus of EU law and related court decisions]. The accounting system still lacks transparency for want of an
        appropriate accounting method for reserved and non-reserved services and of separation of accounts.
        The absence of transparent monitoring of State aid and of supporting policies to reduce distortion has an
        adverse effect on competition and competitiveness in the economy. Public procurement policies continue to be
        undermined by exceptions to the regulatory framework.

112 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                                                  P T T

PTT provides the following domestic and international services: letter post, parcel post, express mail service
(EMS), cash-on-delivery (COD), door to door delivery service (Alo Post), telegraph, telepost, money order,
postal checks, bill collection, payment, foreign exchange, train ticket sales, and insurance transactions.
Types of insurance sold through PTT include accident, life, liability, emergency health, and travel policies.

Perhaps the most important PTT initiative is its PTTBank project, which offers banking services to
individuals and corporations through post offices. Prominent in this effort are PTTmatic bank kiosks and
PTTcards for postal checking accounts, with electronic tie-ins to conventional credit card systems. Money
transfer and bill payment, especially in rural areas where there are no conventional bank services, have
allowed PTT to put down deep roots within the nation’s financial infrastructure. By 2010, 1,997 PTT post
offices had been upgraded to banking outlets.

In 2009, PTT derived 123 million TL in revenue on commissions from financial transactions. That commission
revenue rose by 31 percent in 2010. As in many other countries, the Turkish post office processes financial
transactions including pensions, bill distribution and collection, ticket and subscription sales, lottery entries,
prepaid cellular cards, and cross-border payments. In 2009, PTT derived 23 million TL on basic banking
services alone. In total, commission revenue came to 64 million TL in 2010.

PTT has also invested heavily in advanced sorting and electronic processing, scanning, and tracking
technologies. In 2010, Turkey started to roll out a hybrid-mail system whereby mail can be electronically
scanned at one post office and remotely printed for delivery at a destination printing center. The post claims
that such techniques cut delivery times and transport costs.

PTT is moving quickly into the e-document business by guaranteeing via software systems the integrity,
tracking, delivery, and signatures on documents. New computer software allows post offices to provide
customers with delivery dates for mail.

Since 2008, PTTcargo has been competing in corporate logistics, introducing advanced software and
facilities for state-of-the-art processing, tracking and transport. This business produced 60 million TL in
revenue in 2010, an increase of 65 percent over the previous year. PTTcargo even has a special unit to cater
to the large number of Turkish citizens who make the pilgrimage to Mecca.

PTT’s Express Mail service, begun in 1983, delivers throughout Turkey and to 110 foreign countries. EMS
generated 56 million TL in 2010, a 17-percent increase over 2009. It includes what the Turks call door-to-
door delivery, whereby information sent into the postal service via telephone or Internet can be delivered
to the recipient’s door and tracked within a guaranteed time period. The total revenue for all PTT logistics
services in 2010 was close to 130 million TL.


PTT also offers a service whereby a consumer may retrieve a printout of important mail from an automated
kiosk 24 hours a day, 7 days a week. PTT is also rolling out promotion and marketing services which use
the mail to drum up business for PTT clients and installing call centers which will process inquiries and
tracking on a 24/7 basis.

From 2009 to 2010, total PTT profit fell from 230 million Turkish lira (TL) to 144 million TL. Operating
income for 2010 increased 9 percent while non-operating income decreased 32 percent. The decline in profit
represents a drop of 38 percent from 2009. Operating costs rose 11 percent, with an 18 percent increase in
transportation costs for the year.
PTT processed 1.015 billion domestic letters in 2010, a decrease from 1.066 billion items in 2009. It
handled 17.2 million international letters in 2010. International traffic -- especially money transfers -- was
concentrated in the sizeable Turkish expatriate communities in Germany, Austria, and Belgium.
PTT breaks out its revenue and expense numbers into Postal Services, Telegraph Services, Logistic Services,
and Non-Operation and Other.
In 2010, Postal Service revenues were 936 million TL with expenses of 871 million TL. Telegraph Services
posted a loss, with revenues of 6 million TL and expenses of 11 Million TL. Logistics also posted a loss,
with 129 million TL in income and expenses of 172 million TL in expenses. Parcel Post reported 333
million TL in revenue compared to 306 million TL in expenses. Non-operation revenue came in at 162
million TL, with 62 million TL in expenses. Total revenues were 1.566 billion TL against total expenses of
1.423 billion TL to produce 2010 profit of 144 million TL.
Turkish postal services are subject to value-added tax.
On a comparative year-by-year basis, Postal Service revenue shows major growth -- going from 554 million
TL in 2003 to 2010’s 936 million TL. However, expenses have been rising as well. Telegraph revenues have
been stagnant despite sharply rising expenses. PTT profits have declined from a high of 377 million TL
in 2008 to 2010’s 144 million TL. A 58-million TL increase in investment over that period -- much of it
coming in Anatolia in the east -- accounted for only part of this reduction. Investments of 140 million TL
are projected for 2011.
Letter mail volume in 2009 was 1,087,295 pieces, which produced a revenue stream of roughly 800 million
TL. In 2010, letter volume decreased by 5 percent. However revenue increased by 6 percent. Oddly, telegraph
services -- e-telegraph -- are offered via internet connections and generated close to 4 million TL revenue
in 2010 on declining volume. PTT offers inbound and outbound tracking for express mail (76 countries),
parcels (81 countries) and letter post (41 countries).

114 Consumer Postal Council | Index of Postal Freedom | 2012
                                                                                               P T T

Like the rest of Europe, Turkey has been affected by the economic downturn. For a period, government
enterprises were given the opportunity to take out special loans from the central government. According
to a 2008 U.S. State Department cable made public by Wikileaks, the president of Turkey’s Privatization
Agency, Metin Kilci, said that his agency was planning to privatize PTT over the next two years. Obviously,
that has not happened, as the post remains entirely state-owned.
In its latest publications, PTT projects that current investments will pay off in future revenues. It predicts
a profit bounce to 325 million TL for 2013.

U N I T E D                                        K I N G D O M

116 Consumer Postal Council | Index of Postal Freedom | 2012
                                                              R O Y A L                             M A I L

                    MARKET COMPETITION:                       Britain’s national post -- Royal Mail -- traces its roots
                      Very Competitive
                                                              to the 16th century and the reign of Henry VIII, but
                                                              its modern iteration was effectively chartered in 1969.
                                                              Each working day, Royal Mail delivers 62 million items
                                                              to 28.8 million addresses.
                                          United Kingdom
                                                              About 163,000 people work directly for Royal Mail
                                                              Group -- more than 60,000 fewer than in 2002. In fiscal
                                                              year 2010-11, which ended in March 2011, Royal Mail
                                                              Group posted revenue of £9.2 billion and operating
                                                              profits of £39 million -- a decline of £141 million over
                                                              the previous year. Overall revenue, however, declined
MARKET FREEDOM:                           MARKET FREEDOM:
                                                              by £193 million and mail volume declined by 4 percent.
Restricted Market                               Free Market   Royal Mail’s core postal operations are lagging. The
                                                              postal group lost £120 million in 2010-11, after making
                                                              £20 million in profits the previous year. Experts predict
                                                              that mail volume will decline by 5 percent each year, and
                                                              postal officials have hinted that 20,000 jobs may be axed.
                                                              A postal reform bill -- the Postal Services Bill -- passed in
                                                              June 2011 set Royal Mail on the path toward privatization.

                                                              Britain’s postal markets were opened to full competition
                                                              on Jan. 1, 2006, three years ahead of the European
                    MARKET COMPETITION:
                       Not Competitive
                                                              Union’s goal of full postal liberalization by 2009.
                                                              Liberalization has been good for Britain’s economy.
                                                              A 2008 study by Europe Economics showed that
                                                              competition in the postal sector created 3,300 new jobs
                                                              and boosted the British economy by £229 million.

Despite the opening of postal markets, Royal Mail remains government-owned and received public subsidies
to the tune of £150 million in its 2010-11 fiscal year. Royal Mail claims that it needs government subsidies to
maintain its network of over 11,800 post offices.
The U.K. government has also committed £1.34 billion of public money over four years to help the post office
network modernize. The European Commission has investigated state subsidies to Royal Mail in accordance
with its rules on State Aid.
In December 2008, the British government released a report that called for the partial privatization of Royal
Mail. Entitled “Modernise or Decline,” the so-called Hooper Report noted that Royal Mail was the only post in
Western Europe to lose money. The report cited a shrinking mail stream and strikes as reasons for dwindling
revenues. The report also found that “in 2007, the postal sector accounted for 60 percent of the days lost to
industrial action across the whole [British] economy.”

U N I T E D                                        K I N G D O M

The report concluded that the government should transfer a 30 percent stake in Royal Mail to a private postal
firm, and assume responsibility for Royal Mail’s pension liabilities, which had reached £4.5 billion by March
2011. In 2010, pension liabilities were £8 billion. Changes in accounting were responsible for the significant
improvement in the organization’s pension outlook.
In June 2011, Parliament passed the Postal Services Bill, which restructured the company’s balance sheet in
hopes of making it attractive for future sale. It also rid Royal Mail of its historic pension deficit by offloading it
onto the government. Ultimately, Royal Mail hopes to sell up to 90 percent of the postal operator to a private
company, leaving the remaining 10 percent for its employees.
In a June 2011 interview following the passage of the bill, Alex Walsh, head of postal affairs for the
Direct Marketing Association, stated, “While the new legislation will render Royal Mail a more attractive
proposition for interested investors, we’re concerned that competition will suffer. There’s also no incentive
for Royal Mail to improve efficiencies or cut costs. So it’s highly likely that commercial mailers will be
saddled with price increases along the line.”

Despite liberalization, competition has yet to fully take hold. Royal Mail is still the dominant actor in the
British postal market.
Currently, 59 firms are licensed to deliver mail in Britain, including the Royal Mail. However, most competitors
only collect and process mail while still paying Royal Mail to handle delivery.
Royal Mail executed 6.4 billion of these last-mile “access” deliveries in fiscal 2009-10, an increase of 20 percent
over the previous year. That means that more than one in three letters was posted in 2009-10 by a competitor but
delivered by Royal Mail. This access mail accounts for half of Royal Mail’s business mail volume.
Given Royal Mail’s government-owned status, taxpayer subsidies, and dominant market share, the playing field
is not entirely level. An independent regulator is tasked with ensuring that Royal Mail does not abuse its market
position when competing with other postal operators.

The Postal Services bill changed the regulatory structure of the U.K. postal market. The Postal Services Commission’s
(Postcomm) tenure as regulator ended October 1, 2011. The communications regulator Ofcom took its place.
The regulator’s duties are largely the same: ensuring that the universal service guarantee is upheld and overseeing
licensed postal operators. Ofcom enjoys greater policing powers over licensed operators than did Postcomm.
Like Postcomm, Ofcom regulates Royal Mail’s prices and its quality of service. A first class stamp runs 46 pence,
and a second class stamp is 36 pence. Royal Mail’s competitors are free to price services as they please, even if
lower than the regulated price.
If other licensed operators are accused of anti-competitive behavior, their cases are referred to the Office of Fair
Trading under general British competition law.

118 Consumer Postal Council | Index of Postal Freedom | 2012
                                                          R O Y A L                           M A I L

Royal Mail is obligated to offer its competitors access to its vast network on a “fair and reasonable basis.” In
other words, all Royal Mail’s competitors must be able to negotiate for use of the universal service provider’s
delivery system, if they wish.

Consumer Focus claims to “champion” consumers’ interest; it absorbed the old Postwatch, an independent
consumer watchdog for postal services in the United Kingdom, in 2008. The group has a statutory responsibility
to monitor Royal Mail’s performance and advises the regulator on action to take if Royal Mail violates the terms
of its license or fails to meet the performance targets set for it by the regulator.
Consumer Focus is also active on local or more parochial issues, such as the closing of post offices, local delivery
problems, and product trials in certain areas. Consumers can employ Consumer Focus’s services in pursuing their
own complaints about mail service.

Royal Mail provides the United Kingdom’s “universal postal service,” which includes the flat-rate stamp and the
obligation to deliver letters to every UK address, 6 days per week. It must deliver parcels 5 days per week. Its
competitors need not fulfill a universal service obligation.
Five service areas are required under the universal service obligation, with postage at a flat rate:
    Priority and non-priority mail services, or more commonly, general letters and packets;
    Non-priority parcel service for packages up to 20 kg;
    Registered and insured services;
    Support services for ensuring the safety and integrity of mail, including mail forwarding for up to 12 months;
    International outbound service.

Bulk mail was removed from Royal Mail’s universal service obligation in August 2011.
Controversially, in mid-2011, Royal Mail asked for permission to leave mail that required an absent addressee’s
signature with neighbors. Consumer Focus said that it was “unconvinced and unimpressed” with the proposed move.

With revenue from letters and other traditional postal services trending downward, Royal Mail has expanded
into several non-postal commercial activities. Through the Post Office, Royal Mail sells life, travel, and other
vehicle insurance policies and provides several basic savings tools. The company also offers personal loans,
mortgages, and other basic financial services. It even sells broadband and phone services. Consumers can also
handle passport business and pay car taxes at the Post Office.
Since launching online savings accounts in August 2010, the Post Office has attracted £4 billion in deposits.

T H E                       U N I T E D                        S T A T E S

120 Consumer Postal Council | Index of Postal Freedom | 2012

                    MARKET COMPETITION:                       The United States Postal Service was created by
                      Very Competitive
                                                              decree of the Continental Congress in 1775, mainly to
                                                              deliver mail between Congress and the armies. Today,
                                                              still wholly owned by the government, it delivers
                                                              168 billion pieces of mail each year to more than 151
                                                              million addresses.
                                                              The number of addresses to which it delivers increases
                                                              year on year; between 2010 and 2011 the figure grew by
                                                              about 637,000. The volume of letters sent by individuals
                                                              is shrinking steadily, with businesses accounting for
MARKET FREEDOM:                           MARKET FREEDOM:
Restricted Market                               Free Market   some 90 percent of the mail market today.
                                                              USPS had 557,251 career and 88,699 non-career
                                                              employees in 2011. More than 85 percent of the Postal
                                                              Service’s career employees are paid according to contracts
                                                              that are negotiated through collective bargaining
                                                              between one of four unions and USPS management.
                                                              The U.S. Postal Service lost $5.1 billion in 2011, after
    United States                                             losing $8.4 billion in 2010. Postal management has
                                                              blamed losses on statutory obligations to pre-fund its
                    MARKET COMPETITION:                       pension and healthcare liabilities through 2017 as well
                       Not Competitive
                                                              as poor economic conditions. Since 2001, USPS has cut
                                                              costs and improved productivity.

The Postal Accountability and Enhancement Act of 2006 (PAEA) established a hard rate cap for market-dominant
products and granted the Postal Service substantial authority to adjust pricing within that cap. It also required
USPS to demonstrate greater financial transparency and granted greater authority to the Postal Regulatory
Commission, the independent body that oversees rate increases.
In 2010, the Postal Service projected $115 billion in cumulative losses by 2020, even if it achieved all cost savings
that it asserted were within its control. It warned that failure to effectively adopt new cost-saving strategies could
produce cumulative losses of $238 billion over the same 10-year period.
The Postal Service is managed by a 9-member Board of Governors, appointed by the President and confirmed
by the Senate. The board functions as a board of directors, responsible for appointing the Postmaster General
and Deputy Postmaster General, who serve at the pleasure of the governors for an indefinite term. Attorney
Thurgood Marshall, Jr. became Chairman of the Board of Governors in January 2012.

T H E                      U N I T E D                                    S T A T E S

USPS opposes liberalization of the market for letter mail delivery, in which it enjoys a statutory monopoly.
USPS also holds a monopoly on access to consumers’ mailboxes, which consumers are responsible for buying
and maintaining.

The letter monopoly was granted under the Private Express Statutes, which were enacted by Congress in
1792. The “letters” over which USPS has control are broadly defined to be “messages between parties,” with
a few exceptions. “Extremely urgent letters” may be delivered by other companies provided that they charge,
at a minimum, the greater of three dollars or twice the amount USPS would charge to deliver the same letter
as First Class or Priority Mail.

Government inquiries have regularly questioned the necessity of the mailbox monopoly, but it has persisted.
The President’s Commission on the Postal Service proposed in 2003 that consumers choose whether to allow
private individuals or delivery companies to access their mailboxes, “so long as it does not impair the universal
service or open homeowners’ mailboxes against their will.”

A 2007 report by the Federal Trade Commission (FTC) agreed. The Postal Service’s monopoly on mailbox use
“limits consumer choice and artificially increases the costs of private carriers,” it concluded.

The United States is currently the only country in the world with a monopoly on mailbox use.

USPS is wholly owned by the U.S. government.

William Henderson, the U.S. postmaster general from 1998 to 2001, wrote upon leaving office that “what the
Postal Service needs now is nothing short of privatization.” He recommended an employee stock-ownership plan
that “would motivate workers by allocating stock to them over time.” However, in contrast to the general trend
in other developed nations, the United States has not taken any steps toward wholesale privatization.

USPS has, however, adopted some de facto privatization of delivery through the use of contractors. A 2008
report by Kevin Kosar of the Congressional Research Service noted that 6,531 carrier routes were served by
contract delivery service providers.

USPS has also increased its reliance on private companies to aid in the completion of other tasks through
procurement contracts. In 2010, 11 private-sector suppliers were each paid over $100 million. The largest supplier
was FedEx Express, which received $1.37 billion for domestic air transportation of postal express shipments,
as part of a 7-year contract which expires in September 2013. A total of seven audit reports by the Postal
Service’s Office of Inspector General noted that weaknesses in process, guidance, training, and monitoring in the

122 Consumer Postal Council | Index of Postal Freedom | 2012

implementation of the FedEx Transportation Contract resulted in more than $94 million in unnecessary costs
to the Postal Service.

Additionally, USPS has regularly entered into worksharing agreements with some bulk mailers of market-
dominant products (as defined by the PAEA), offering postage discounts in exchange for meeting certain criteria,
such as pre-sorting, processing, and volume. Negotiated Service Agreements, as some of these are termed, are
contractual agreements with major mailers that include customized pricing incentives.

It’s not clear whether these deals help USPS’s bottom line, and Postal Regulatory Commission opinions have
questioned Postal Service management’s effectiveness negotiating contract terms.

As described above, USPS has two monopolies: one on letter delivery and the other on the use of mailboxes.
USPS enjoys additional privileges as a government entity: It is exempt from most taxes (including taxes on
its vast real estate holdings), is permitted to maintain a substantial level of secrecy in many financial matters,
and may borrow from the U.S. Treasury at favorable rates.

The PAEA prohibits the subsidization of non-monopoly competitive products (like priority mail packages)
with revenues from monopoly products, but critics often accuse the Postal Service of engaging in such cross-
subsidization regardless of the law. With between 40 and 45 percent of its operating expenses lumped into
one vast “institutional overhead” category, to which market-dominant products contribute higher levels of
“cost coverage” than competitive products, many observers feel such subsidies are inevitable.

“Even with growth in our package business, we cannot replace the profit contribution of First-Class Mail that
has been lost over the past few years and will continue to decline in the future,” Postmaster General Patrick
R. Donahoe said in 2011.

The Postal Regulatory Commission is an independent agency, created by the Postal Reorganization Act of 1970
to set postage rates, and invested with new oversight powers under the 2006 PAEA. There are five commissioners,
each appointed by the President and confirmed by the U.S. Senate. The Commission considers rates proposed by
USPS, adjudicates complaints, and determines whether the Postal Service is in compliance with current law. The
PRC has subpoena authority, the power to adjust rates, and the ability to levy fines against the Postal Service.

T H E                      U N I T E D                                      S T A T E S

REGULATION & OVERSIGHT                            (CONTINUED)
Additional oversight is provided on an ongoing basis by entities including the Postal Service’s Office of
Inspector General, House and Senate committees with postal oversight responsibilities, and the Government
Accountability Office.

The Universal Service Obligation is understood in the United States as six-day-a-week delivery to every address
in the nation at a uniform price. As defined by the Postal Reorganization Act of 1970, the USO requires the Postal
Service to “provide prompt, reliable, and efficient services to patrons in all areas and... render postal services to
all communities” at “fair and equitable” rates, including a uniform rate for sealed letters.
The Postal Regulatory Commission estimated the value of the U.S. Postal Service’s combined monopolies to be
$1.55 billion in 2010. This represents a sharp decline from the $3.48 billion the Commission identified as the
value of the combined monopolies in 2007.
It also calculated the total cost of the Universal Service Obligation to be $5.37 billion in 2010, an increase of
more than $950 million over 2007.
In late 2009, USPS began to seek congressional approval to change the USO from six-day-a-week delivery to
five-day-a-week delivery. Historically, Congress has opposed any efforts to weaken the USO. Two years later, the
Service had not yet received congressional approval to eliminate a day of delivery.
In late 2011, the Postal Service announced a plan to save costs by loosening delivery standards for first-class
letters and postcards. The plan, which postal officials declared would save $2.1 billion annually, would effectively
end all next-day delivery of first-class letters, to be replaced with a new standard of two- to three-day delivery.

In January 2012, the price to mail a single letter rose to 45 cents -- the second price increase under the terms of
the PAEA.
Each ounce beyond the first costs 17 cents, and there are additional costs based on size and shape. Stamp prices
have risen in line with inflation since 1970, and by nearly 30 percent since the beginning of 2001. Businesses
and institutions that mail in bulk, which account for 85 percent of USPS revenue, receive discounts from the
First Class rate.
In 2007, USPS introduced the “Forever Stamp,” which is purchased at the going rate but is valid for use indefinitely,
even if used after stamp prices have increased.

124 Consumer Postal Council | Index of Postal Freedom | 2012

The 2006 legislation classified postal products into market-dominant and competitive categories, with different
pricing rules for each. It lists the following as market-dominant products: first-class mail letters and sealed
parcels; first-class mail cards; periodicals; standard mail; single-piece parcel post; media mail; bound printed
matter; library mail; special services; and single-piece international mail.
The Act lists the following as competitive products: priority mail; expedited mail; bulk parcel post; bulk
international mail; and mailgrams.
Under the PAEA, price increases for monopoly products are limited to increases in the Consumer Price Index.
These products represent 90 percent of the Postal Service’s revenue base.

  O A U M E T
C M N SR K E R                                 P O T P             N N L
                                               C O S M A LA R IOSU O C I S

       What are the fundamental factors that define national postal
       markets for household consumers and small businesses?

       The Index of Postal Freedom evaluates elements including quality of service, the
       range of choices and competition, pricing, and the level of modernization that
       consumers can expect from their national posts. Each of these factors is analyzed
       in the Index’s profiles of individual countries. The Index’s Market Comparisons
       provide snapshot views of these indicators across countries, and show how
       markets, and the service that consumers receive, compare around the world.

 126 Consumer Postal Council | Index of Postal Freedom | 2012
# 1
Long lines at the post office got you down? In this                                                                            Russia has both the largest land mass among nations as
first in a new series analyzing data on national postal                                                                        well as one of the world’s lowest population densities,
markets, it is noted that consumers in the world’s                                                                             so it is not surprising that its 40,000-odd postal outlets
largest economies are served by widely-varying                                                                                 serve the fewest people per outlet.
frequencies of postal retail networks.                                                                                         France, Mexico, Hungary, and Portugal followed
Russia’s post offices serve the fewest people, on average,                                                                     Russia with the fewest people per post office.
among the countries in the U.S. Consumer Postal                                                                                The average Kenyan post office serves nearly 15
Council’s Index of Postal Freedom, while Kenya’s serve                                                                         times more people – nearly 52,000. That’s 20,000
the most, according to an analysis of Universal Postal                                                                         more people than any other country featured in the
Union data.                                                                                                                    Index. Chile, China, Egypt, and Spain rounded out the
The United States ranks near the middle, with                                                                                  countries with the most people per post office.
approximately 8,400 people per post office. This figure                                                                        Most countries, 18 of 23 analyzed, saw the average
has increased by 5 percent over the past five years, and                                                                       number of people per post office increase between
the U.S. Postal Service has embarked on a strategy to                                                                          2004 and 2008. Kenya, Great Britain, and China posted
close thousands more post offices in the coming years.                                                                         the largest such growth over this period, at 29 percent,
The average Russian post office has 3,502 consumers.                                                                           24 percent and 18 percent, respectively.














                                                                                   United Kingdom




                                                                                                                                            United States




                                                                                                                                                                                          South Korea






MARKE T                                                                    CO M PA R IS O NS
# 2
The productivity of national posts, as expressed by the                                                        of letters per postal worker grow between 2004 and 2008.
number of business and personal letters per postal worker,                                                     Seven of these countries notched double-digit decreases.
varies widely, while the U.S. Postal Service averages more                                                     South Korea’s decline in letters per employee was the
than twice the letter productivity of number two Korea                                                         smallest, at just over 4 percent. Only Mexico posted a double-
Post.                                                                                                          digit increase in letters per worker during this period.
The United States leads the category by a wide margin,                                                         Russia’s productivity has declined the most -- by more than
with nearly 250,000 letters per postal worker in 2008,                                                         46 percent. In Russia, the number of letters per worker in
among the countries in the Consumer Postal Council’s                                                           2008 was just 2,878. The country’s postal workforce has
Index of Postal Freedom. That’s nearly 140,000 letters                                                         increased by more than 110,000 since 2004 even as letter
per worker (full-time and part-time) more than the next                                                        volume has declined by more than 89 million.
country, South Korea.                                                                                          This indicator correlated poorly with population density,
The United States has the largest postal market in the world                                                   and only slightly with better per-capita GDP. China,
-- which more than counterbalances its sizeable workforce.                                                     India, and Indonesia ranked just above Egypt and Russia
From 2004-2008, the number of letters per worker in the                                                        with the fewest letters per postal worker studied. In China,
United States increased 3.7 percent. But the sharp declines                                                    the number of letters per employee declined by more than
in mail volume that began during the first half of 2008                                                        42 percent between 2004 and 2008.
actually caused a net decrease in letters per worker between                                                   Along with the United States, South Korea and Great
2004 and 2010, despite the U.S. Postal Service reducing its                                                    Britain posted more than 100,000 letters per postal
workforce by more than 93,000 employees.                                                                       worker. Israel and the Netherlands rounded out the top
Most countries, 15 of 23 analyzed, saw the average number                                                      five countries with the most letters per postal employee.
























                                                                                                                                                                                           United Kingdom

                                                                                                                                                                                                            South Korea

                                                                                                                                                                                                                          United States

128 Consumer Postal Council | Index of Postal Freedom | 2012
# 3
Does it seem like all you find in your mailbox anymore                                                    Germans and Canadians also received more than 100
is junk mail? If you live in Canada, Switzerland, or the                                                  pieces of advertising mail per person.
United States, then that just might be the case.                                                          The Kenyan postal market features barely any
Americans receive the most pieces of advertising mail                                                     advertising mail -- just 512,000 pieces in 2008 for
per person among the countries in the U.S. Consumer                                                       its nearly 40 million people. Residents of Egypt,
Postal Council’s Index of Postal Freedom, nearly                                                          Indonesia, and Mexico all receive less than one piece
twice as much as third-place Canada, according to                                                         of advertising mail per year.
an analysis of 2008 Universal Postal Union data. In                                                       In about half the countries analyzed, the number of
that year, the average American received 320 pieces of                                                    pieces of advertising mail per person declined between
advertising mail -- more than six per week.                                                               2005 and 2008, with the steepest decline in Mexico,
However, according to U.S. Postal Service data, the                                                       at nearly 28 percent. Russia, Israel, Italy, Switzerland,
number of pieces of advertising mail per American                                                         and Portugal -- in addition to the United States -- also
has fallen by about 55 pieces since then. Since 2005,                                                     experienced decreases in advertising mail.
advertising mail per person has fallen by more than 20                                                    Advertising mail per person grew in seven countries
percent in the United States.                                                                             as well -- with Egypt leading the way with growth
The Swiss receive nearly as much advertising mail as                                                      of more than 220 percent between 2005 and 2008.
Americans -- just 14 pieces per person less. In 2008,                                                     Canada, South Korea, Brazil, and Hungary all saw
Swiss Post delivered 2.3 billion pieces of advertising                                                    double-digit growth in advertising mail per person
mail to the nation’s 7.5 million people.                                                                  over the four-year period.


                                                                                                                                68.2 75.2
                      50                                                                                  29.7
                           0.0 0.2         0.6                0.8      1.9      2.1 10.3 10.6


                                           (2009) Indonesia






                                                                                                                  South Korea





                                                                                                                                                                                        United States

MARKE T                                                                                 CO M PA R IS O NS
# 4
Posten, Sweden’s national post, generated the greatest                                                                   Growth in operating revenue per worker for both
amount of revenue per employee of 24 countries                                                                           Posten and France’s La Poste was even better through
profiled in the U.S. Consumer Postal Council’s Index                                                                     2009. The two national posts pared their workforces
of Postal Freedom, according to 2008 data from the                                                                       even as their revenues increased. Swedish Posten’s
Universal Postal Union. India Post, by contrast, had                                                                     total number of employees was roughly 10,000 fewer
the lowest ratio of revenue per postal worker.                                                                           in 2009 than in 2005. La Poste cut about 28,000 people
                                                                                                                         from its labor force between 2005 and 2009.
The U.S. Postal Service posted revenue of $100,550
per worker in 2008, which puts it in the top third of                                                                    Only four countries experienced a decline in revenue
countries profiled by the Index of Postal Freedom.                                                                       per worker in the same time period, with Chile’s
However, Sweden’s post generated almost twice as                                                                         21-percent decline the most severe. Other countries
much revenue per employee. The United States has a                                                                       that witnessed declines include Canada, Great Britain,
postal workforce nearly 30 times larger than Sweden’s.                                                                   Korea, and Mexico. In 2009, however, Great Britain’s
                                                                                                                         revenue per worker increased by nearly $14,000, or
Revenue per worker at USPS has hovered near $100,000                                                                     about 17 percent, but failed to reach its 2007 high.
since 2005, falling slightly below that benchmark in                                                                     South Korea experienced a similar phenomenon, with
2010. A reduction of 26 million workhours was also a                                                                     revenue per worker jumping by more than $4,000, or
driving factor behind a 2.2-percent increase in USPS’s                                                                   about 4 percent, in 2009.
Total Factor Productivity in 2010.
                                                                                                                         New Zealand, the Netherlands, South Korea, France,
Of the 24 countries surveyed, 12 saw double-digit                                                                        Switzerland, Germany, and Sweden all had ratios of
growth rates in operating revenue per worker between                                                                     operating revenue per worker above $100,000. At the
2005 and 2008, including an 81-percent increase in                                                                       other end of the scale, India, Russia, and Indonesia all
Sweden and a 45-percent increase in France.                                                                              posted revenue of less than $10,000 per worker.







                                                              (2007) Egypt







                                                                                                                                    United Kingdom




                                                                                                                                                                              United States





                                                                                                                                                                                              (2007) New Zealand

130 Consumer Postal Council | Index of Postal Freedom | 2012
C O N S U M E R                                     P O S T A L                             C O U N C I L


The Postal Freedom Index is a unique resource that offers valuable backg round
and history about the provision of postal services around the world. In the current
era, with the implications of the digital age and its affect on posts just being
realized, such big picture analyses are useful in informing our policy discussions.

     From the Preface by David C. Williams, Inspector General for the United States Postal Service

                       CONSUMER POSTAL COUNCIL
                       1600 Wilson Boulevard, Suite 900A, Arlington, VA 22209
                       Tel 703.312.4563 | |

2012 EDITION | The Postal Freedom Index is updated regularly. Check for new and updated information.

Shared By: